EURUSD Gains on German Deficit Report, US Consumer Sentiment Sinks

EURUSD, US Consumer Confidence, Germany Deficit Spending – Talking Points

  • Consumer Confidence falls to 92.1, the lowest reading since January
  • Germany confirmed they are ready to run a deficit to combat any coming recession, sending EURUSD higher in early US trading
  • Housing starts show weakness as multi-family units mask demand for Single-family housing

The University of Michigan Consumer Sentiment figure printed a disappointing 7-month low Friday morning as consumer optimism stumbled from last month’s reading. Analyst consensus was estimating the headline figure to come in at 97.0, but the actual number came in well short at 92.1. Consumers noted the recently announced tariff proposal from the Trump administration calling for additional tariffs on Chinese imports. Even with the postponed start date, which aims to save the holiday shopping season, consumers remain concerned about increased prices on the goods they buy.

The recent rate cut from the Federal Reserve also spurred consumer concern of an impending recession, with consumers following the conventional view that interest rate cuts coincide with a recession. Markets were largely unchanged after the report, however. Shortly after the release of US consumer sentiment data, a report out of Germany sent the US Dollar Index lower driven by gains in the Euro against the greenback. Germany’s Chancellor Merkel and Finance Minister Scholz indicated that the country’s government stands ready to prop up the German economy if it falls into a recession according to a report from Spiegel. German bund yields moved up following the report with the German 10-Year Bund rising up to -0.687%.

EURUSD Price Chart – 1-Minute Time Frame

EURUSD Price Chart

US housing starts also printed a miss this morning with 1191k starts in July – below the estimate of 1256k – while the prior month was also revised down by 12k. Although single-family units saw a gain, apartment buildings and multi-family homes sunk at a faster rate. While strong wages and low mortgage rates bolsters demand, home builders are still faced with labor shortages coupled with gaining lots mostly due to burdensome regulations in parts of the country.

DXY Index – 1-Minute Time Frame

US Dollar Index Price Chart

–Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

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