USD Pulls Back though April Consumer Confidence Jumps to 4-year High
THE TAKEAWAY: May U. of Michigan Confidence Final Index Surges to 77.8 > Americans Appeared Optimistic about the State of the Economy> USD/CAD Extends Loss
Confidence among U.S. consumers hit four-year high in May, reflecting their persistent optimism about the prospective strength of the economy as gasoline prices continued to edge downward and jobs have become plentiful in recent months.
The Thomson Reuters/ University of Michigan preliminary index mounted to 77.8 in May, ahead of 76.4 in March and well above last May’s 74.3. The print beats the consensus forecast as sixty-eight economists surveyed by Bloomberg News anticipated the index to drop to 76.
The increase in confidence over the past six months has been substantial, with the Sentiment Index climbing above the recession average of 69.3 but still well below the average of 88.1 for non-recessionary periods. Consumers were still hopeful about future job gains despite disappointing recent development, with the overall references to the employment conditions remained positive enough to support the world’s largest economy’s prospect. Economic Conditions Index significantly rose to 87.3 in May from 82.9 in April. In contrast, Economic Outlook Index barely declined to 71.7 from previous reading’s 72.3.
Additionally, inflation expectations for one year ahead continued to fall to 3.1 percent this monthfrom 3.2 percent in April and 3.9 percent in March as a result of remarkable declines in gasoline costs. Meanwhile, expectations for five year slightly edged up to 3.0 percent from 2.9 percent in the previous month.
USDCAD1-minute Chart: May 11, 2012
Chart created using Strategy Trader – Prepared by Trang Nguyen
The U.S. dollar weakens versus the Canadian dollar in North American trade morning session after the better-than-expected Canadian employment reading pushed the loonie to the top currency performer. The U.S. dollar continued to trade lower against to loonie despite confidence among U.S. consumers climbed tothe highest level since January 2008. The Relative Strength Indicator falling below the 30 level signaled that forex trading crowd was massively selling off U.S. dollar in favor of the loonie. At the time this report was written, the USDCAD pair trades back below parity at $0.9957.
--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com
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