After the release of the University of Michigan’s Consumer Sentiment Index figures and the housing market data, the US Dollar (USD) showed a decline. Despite this, markets still maintain confidence in a potential cut in September. This confidence implies that investors are expecting further easing by the Federal Reserve (Fed) in the near future.
The latest figures from the University of Michigan’s Consumer Sentiment Index showed an improvement, with a reading of 67.8 for early August. This was a rise from the previous month’s figure of 66.4 and surpassed market expectations. However, the current conditions index witnessed a decline, while consumer expectations increased.
On the other hand, the housing market data in the US painted a different picture. Housing starts recorded a decline of 6.8% in July, dropping to 1.238 million units. Additionally, building permits decreased following a previous rise in June. This data indicates a slowdown in the housing market, which could have implications for the overall economy.
Despite the mixed economic data, markets seem overconfident in their expectations for a Fed rate cut. It is crucial to note that the Fed’s decisions will heavily depend on incoming data releases. From a technical standpoint, the US Dollar Index (DXY) is showing signs of consolidation in negative territory. The Relative Strength Index (RSI) is hovering around 40, while the Moving Average Convergence Divergence (MACD) indicator suggests subdued price action. Overall, the technical outlook remains bearish for the USD.
The recent economic data releases have had a varied impact on the US Dollar. While market confidence in a rate cut remains high, the actual decision by the Fed will be contingent on upcoming data. The divergence between consumer sentiment and housing market data has created uncertainty in the market, reflected in the technical indicators for the USD. Investors will need to closely monitor future developments to gauge the direction of the US Dollar.