DowntownForex

US Dollar Sharply Higher as Consumer Confidence Retreats

By Forex District – The Dollar rose sharply across the board after a report by The Conference Board showed consumer sentiment retreat in June. Data was unexpectedly weaker than estimates catching market participants by surprise. U.S. stocks turned lower after the news, damping demand for higher yielding assets.

U.S. consumer confidence fell to 49.3 in June, down from 54.8 in May. A market which was building confidence on sentiment readings, just received a sharp blow. The Present Situation and the Expectations Index declined to 24.8 from 29.7 and to 65.5 from 71.5, respectively.

“After back-to-back months of strong gains, Consumer Confidence retreated in June. The decline in the Present Situation Index, caused by a less favorable assessment of business conditions and employment, continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak,” Lynn Franco, Director of The Conference Board Consumer Research Center said of the report.

Currency traders will continue to look to equity markets for direction. If stocks manage to recover, the Dollar could potentially lose some of its post announcement gains. Nevertheless, the news may undermine recent market optimism and may lead to further falls in the majors.

The Tankan Manufacturing index will be released in the Asian session and could also have significant impact. The index anticipates a reading of -44, up from the record low of -58, and expects to provide solid evidence that the worst may be over. However, if the release disappoints, risk aversion will regain strength and continue benefiting the Dollar.

By Juan P. Bejarano. Edited by Graciela Gordillo

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