University of Michigan Confidence Tumbles to the Lowest Level Since August 2009
Posted 07-16-2010 at 05:20 PM by DailyFX
The U.S. University of Michigan consumer sentiment index for the month of July plunged to 66.5 from 76.0 in June to exceed economists’ expectations of 74.0. The breakdown of the report showed that the economic outlook fell to 60.6 from 69.8 the month prior, while economic conditions tumbled to 75.5 from 85.6 in June. Immediately following the disappointing data, the Japanese yen continued to gain ground against all major currencies, and was up the most against the New Zealand dollar, climbing 3.73 percent.
Today’s decline in consumer confidence may be attributed to a stubbornly high unemployment rate in the United States that has investors questioning the health of the world’s largest economy. Private Payroll growth remains weak as shown by statistics surrounding the Non-Farm Payrolls report earlier this month (83K vs. 113K expected). Additionally, the fall in the U.S. stock market may serve as another catalyst for the massive decrease. All in all, consumers remain fearful of policy changes, while weak housing prices, high unemployment, and tight credit conditions continue to weigh on sentiment.
Market Reaction
The USD/JPY looks to have extended its overnight decline and now looks poised to take out resistance of 86.00. Today’s southern journey began with the Bank of Japan raising their growth forecast, while holding their key overnight lending rate at the record low. Investors should caution holding onto their short positions going into next week as daily studies indicate that the pair is oversold.
All major currencies pushed lower against the Japanese Yen and extended their decline following the disappointing U. of Michigan confidence report. The strength in Japanese yen is of particular note as broader risk aversion will likely offset euro optimism.
Today’s decline in consumer confidence may be attributed to a stubbornly high unemployment rate in the United States that has investors questioning the health of the world’s largest economy. Private Payroll growth remains weak as shown by statistics surrounding the Non-Farm Payrolls report earlier this month (83K vs. 113K expected). Additionally, the fall in the U.S. stock market may serve as another catalyst for the massive decrease. All in all, consumers remain fearful of policy changes, while weak housing prices, high unemployment, and tight credit conditions continue to weigh on sentiment.
Market Reaction
The USD/JPY looks to have extended its overnight decline and now looks poised to take out resistance of 86.00. Today’s southern journey began with the Bank of Japan raising their growth forecast, while holding their key overnight lending rate at the record low. Investors should caution holding onto their short positions going into next week as daily studies indicate that the pair is oversold.
All major currencies pushed lower against the Japanese Yen and extended their decline following the disappointing U. of Michigan confidence report. The strength in Japanese yen is of particular note as broader risk aversion will likely offset euro optimism.
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