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US Personal Income Dropped More Than Expected; USDJPY Bearish

US Personal Income Dropped More Than Expected; USDJPY Bearish

Renee Mu, Currency Analyst

THE TAKEAWAY: [January Personal Income fell 3.6 percent; Personal Spending rose 0.2%] > [Increased payroll-tax rate pushes down savings] > [USD/JPY Bearish]

Consumer spending rose in January while personal income dropped by the most in 20 years, indicating households adjusted to the increased pay-roll tax by cutting savings. According to the Commerce Department, personal spending climbed 0.2 percent in January, the third continuous rise since last November, following a revised 0.1 percent increase the previous month. Core personal consumption expenditure rose 0.1 percent from a month ago and 1.3 percent year-on-year, falling short of consensus forecasts of economists surveyed by Bloomberg News.

Meanwhile, personal income decreased by 0.1 percent in January, following a gain of 2.6 percent in December. The consensus forecast of economists surveyed by Bloomberg News had projected a 0.2 percent gain in spending and 2.4 percent loss in income. Therecovery in labor and housing markets help to keep support household spending in US. Yet, with rising costs of gas and a higher tax rate, Americans are under pressure to tap into their saving.

USDJPY 1-minute Chart: March 1, 2013

US_Personal_Income_Dropped_More_Than_Expected_USDJPY_Bearish_body_Picture_1.png, US Personal Income Dropped More Than Expected; USDJPY Bearish

Chart created using Market Scope – Prepared by Renee Mu

In the minutes following the data release, the U.S. dollar fell against major currencies, with USDJPY dropping to 92.70 yen. Yet as markets corrected, the greenback quickly pared most of its loss and rebound to the level before the data release. At the time of this report was written, the USD/JPY was trading at 92.75 yen.

--- Written by Renee Mu DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.