Dollar Gains As Consumer Confidence Falls Less Than Expected
THE TAKEAWAY: [US. April Final Michigan Confidence fell less than expected] > [Private consumption expands at a modest rate; government spending contracts] > [USDJPY Bullish]
April Final Consumer Confidence in the U.S. dropped less than expected, to a three-month low from the nine-month low initially reported. According to a report released by University of Michigan today, the Reuters/U of Michigan Aprilfinal index of U.S. consumer sentiment fell to 76.4 this month following an increase to 78.6 in March. The U. of Michigan Confidence Index is considered as one of the best leading indicators for future consumption. Economists in a survey polled by Bloomberg News had projected a final decline to73.5 after a preliminary April reading of 72.3.
The report indicates that consumer spending may slow down due to the Federal budget cuts that began taking effect on March 1. The reduction will trim 5 percent from domestic agencies and 8 percent for Defense Department this fiscal year. According to another report released earlier today, the US economy grew at a moderate pace of 2.5 percent in the first quarter with public consumption below forecast. Yet private consumption grew stronger than expected despite the removal of the payroll tax cut. As a result, the economy is likely to continue expand but with some drags.
USDJPY 1-minute Chart: April 26, 2013
Chart created using Marketscope 2.0– Prepared by Renee Mu
In the minutes following the data release, the U.S. dollar rallied slightly against the major currencies, with USDJPY rising to 98.20. As the market corrected, the greenback trimmed its advance after the report. At the time of this report was written, the USDJPY was trading at 97.79 yen.
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--- Written by Renee Mu DailyFX Research