USD: Higher US consumer confidence consistent with robust consumption - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has remained on a stronger footing overnight during a relatively quiet trading session.

Key Quotes

“The US dollar is still deriving support from the more hawkish signal from the Fed that it is moving closer to resuming rate hikes, although upward momentum has been limited so far by the market’s scepticism that the Fed will hike rates as early as next month. Stronger economic data releases will be required in the interim to convince the market that a September rate hike is more likely with the Fed stressing that the timing of the next rate hike remains data dependent.

Fed Vice Chair Fischer provided a little extra insight policy yesterday in an interview with Bloomberg stating that “I don’t think you can say one and done” highlighting that he still believes that a monetary tightening cycle is appropriate as the US economy is very close to full employment. However, he added that the world is becoming increasingly interconnected and the Fed has to take this into account and be aware of when making policy decisions which is dampening required policy tightening.

The release yesterday of the Conference Board’s latest consumer confidence survey for August was stronger than expected providing further reassurance that consumer spending growth is likely to remain robust. The headline measure of consumer confidence rose to its highest level since September of last year. There was a marked improvement in both the present situation and expectations sub-components. The present situation sub-component rose to a new cyclical high alongside new record high in the US equity market and the return to more solid employment growth. At the margin the report will reinforce the case for the Fed to resume rate hikes soon. Attention will now switch today to the release today of the latest ADP survey.”