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As Expected, US Consumer Confidence Falls from 16-Year High in April

As Expected, US Consumer Confidence Falls from 16-Year High in April

Dylan Jusino, Contributor

Talking Points:

- US Consumer Confidence falls from the 16-year high in April coming in at 120.3.

- Recent data lower, Confidence may be catching up withweak hard data trends.

- US Dollar falls below March low at 98.86.

- See the DailyFX Economic Calendar for upcoming economic data and for a schedule of live coverage see the DailyFX Webinar Calendar.

The US Consumer Confidence index in April revealed that sentiment pulled back from the 16-year high reached last month. The latest data missed estimates at 120.3 vs 122.5 projected. Weaker sentiment in April was also reflected in the Confidence Board Present Situation and Expectations, which were fell from last month at 140.6 and 106.7, respectively.

Consumer Confidence is a key indicator in assessing consumer sentiment regarding business conditions, employment and personal income. The Conference Board index has the largest pooling sample of any U.S. measure of consumer confidence. The index generally serves as leading indicator for consumer spending. Higher the confidence levels may encourage consumer spending. On the contrary lower or falling consumer confidence on the other hand is typically associated with decreased spending and consumer demand. This is key especially in today’s market where roughly 70% of US GDP direct related to consumption.

In April, we see that sentiment is beginning to taper which may indicate that the gap between soft and hard data is narrowing. Weaker sentiment falls in line with a 95.7% chance of the Fed holding rates in May according to CME’s FedWatch Tool. Holding rates will buy the Fed more time so that sluggish inflation can catch up. More so, this will allow central banks that have yet to raise rates, like the Bank of Canada, to catch up on the path to normalization.

As it turned out, weak sentiment in April did in fact lead to a decline in the US Dollar Index (DXY) as Currency Analyst David Song predicted in, “Narrowing U.S. Consumer Confidence to Fuel EUR/USD Breakout.”

Below is a list of data that has driven the US Dollar Index lower:

- USD Consumer Confidence (APR): +120.3 actual versus +125.6 previous

- USD Conf. Board Present Situation (APR): +140.6 actual versus +143.1 previous

- USD Conf. Board Expectations (APR): +106.7 actual versus +113.8 previous

Chart 1: DXY 15-minute Chart (April 25, 2017 Intraday)

Immediately following the data, the US Dollar Index fell below the March low price level of 98.86. DXY fell from 99.05 ahead of the release to as low as 98.77 thereafter. But at the time this report was written, the pair recovered slightly at 98.86. Markets may have sobered up after at 16-year high print.

--- Written by Dylan Jusino, DailyFX Research

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