The US Dollar (USD) experienced a decline following the release of the University of Michigan’s Consumer Sentiment Index figures and softer-than-expected housing market data. Markets remain confident about a potential rate cut by the Federal Reserve in September. However, the data suggests that the US economy is maintaining growth above trend, leading to an overestimation by the market in pricing for aggressive easing. The Federal Reserve remains data-dependant in its decision-making process.
The University of Michigan’s Consumer Sentiment Index for early August improved to 67.8 from July’s 66.4, surpassing market expectations. The Current Conditions Index declined to 60.9 from 62.7, while the Consumer Expectations Index increased to 72.1 from 68.8. This indicates a mixed sentiment among consumers regarding the current state of the economy and future expectations.
In contrast, the housing market in the US showed a decline, with Housing Starts decreasing by 6.8% in July to 1.238 million units. Building Permits also decreased by 4% after a previous rise of 3.9% in June. This signals a softened housing market in the US, which could have implications for the broader economy.
Technical analysis of the US Dollar Index (DXY) indicates a sideways trend with indicators showing a deep consolidation in negative terrain. The Relative Strength Index (RSI) is around 40, and the Moving Average Convergence Divergence (MACD) indicator’s red bars are stabilizing, suggesting subdued price action. Despite some gains on Thursday, the overall technical picture remains bearish. Buyers are struggling to make a significant move, with the DXY index trading in a tight range between 102.50 and 103.30.
The recent economic data releases have had a mixed impact on the US Dollar. While market confidence in a rate cut remains high, the actual data suggests that the US economy is still growing above trend. The housing market data paints a different picture, indicating a softening in the housing sector. Investors will continue to monitor incoming data releases to gauge the Federal Reserve’s next moves and the potential impact on the US Dollar.