FOREX NEWS: US October Consumer Confidence Hits Five-Year High
THE TAKEAWAY: U.S. consumer confidence climbs to five year high in October > Likely to boost household spending, though higher confidence levels constrained by concerns over fiscal cliff > USDJPY bearish
Confidence among U.S. consumers climbed in October to its highest level since September 2007, signaling a likely boost in household spending ahead of the upcoming holiday season. However, the rise in the sentiment gauge rose less than expected in October, with the final monthly reading of the Thomson Reuters / University of Michigan Confidence Index (MCSI) coming in at 82.6, lower than the preliminary reading of 83.1. The median forecast of 60 economists surveyed by Bloomberg News had projected a reading of 83.0 in the sentiment index.
Increases in property values and stock prices along with the recent decline in unemployment have lifted consumer sentiment. The surge in consumer confidence should help bolster household spending, which makes up about 70 percent of the U.S. economy, during the upcoming holiday season. However, further improvements in confidence levels could be restrained as Americans await post-election economic policies addressing the looming fiscal cliff of tax increases and government spending cuts.
USDJPY 1-minute Chart: October 26, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
As seen in the USDJPY currency chart above, the U.S. dollar tumbled against the Japanese yen, its safe-haven counterpart, ahead of the data release. The greenback remained lower after the final reading in the sentiment gauge came in lower than expected. At the time this report was written, the USDJPY pair was trading lower at 79.57 yen.
--- Written by Tzu-Wen Chen, DailyFX Research
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