While data covering US consumers and home sales is just off recent record lows, the market’s most recent round of data has nonetheless crossed the wires better than the official consensuses attached to each inidcator. The headline indicator for the morning session was the Conference Board’s survey of consumer sentiment for the month of August. With the market already expecting an improvement from the report (thanks in part to the pickup in the University of Michigan’s reading), a better-than-expected 56.9 print merely added to the bullish sentiment the report generated.
For historical perspective, this was the second consecutive improvement and only the highest reading in three months. Fundamentally, the optimistic turn is likely a result of the drop in gasoline prices (and the sharper tumble in upstream energy prices) through August. In fact, without this encouraging component and its influence on spending habits, Americans would still be looking at failing labor trends, decelerating wage growth and consistently rising prices for necessary and discretionary goods. Looking into the details of the report the reading on current conditions actually deteriorated, leaving the forecast component to prop up the headline reading. From the current reading, the spread on busines conditions and employment both deteriorated. For the coming six months, expectations for business conditions, labor trends and plans to make major purchases all improved. Going forward, it will likely be the price of gasoline that determines whether these expectations become reality and dollar traders know it. After the string of reports, the US dollar was little changed against most of its major counterparts as fundamental traders held off on reacting to the morning’s data to prepare for the FOMC minutes due later in the afternoon.