The US dollar ended Friday mostly higher on Friday, and true to what we saw throughout much of the week, it was just one large spike over the course of 30 minutes that determined which currencies won and lost. Ultimately, this is indicative of the low volume trading so often associated with the “summer doldrums,” and this will likely remain the case until at least next week, if not until after Labor Day. Looking to the data on hand, US personal income went unchanged during July, and while wage and salary growth managed to increase 0.1 percent during the month, the annual rate held at -5.1 percent. Personal spending rose by 0.2 percent, but this was due almost exclusively to a rise in auto sales driven by the “cash for clunkers” program, which formally ended on August 24. Excluding autos, personal spending actually went unchanged, which is probably more indicative of the current consumption environment.
Meanwhile, the final reading of the University of Michigan’s consumer confidence index was a bit better than expected and was revised up to 65.7 from an initial estimate of 63.2. That said, this was still down from the July reading of 66.0, which is somewhat surprising in light of the surge in the Conference Board’s measure to 54.1 in August from 47.4. The underlying trends within both reports remained the same though, with confidence in the economic outlook leading gains, while sentiment on current economic conditions deteriorated or remained very weak, which was the case with the Conference Board’s index.
The main event risk for the US dollar on Wednesday will be the release of the minutes from the Federal Reserve’s last meeting on August 12. Following that meeting, the policy statement eventually led to a quick return to risk-taking that pushed the greenback lower, as the Federal Open Market Committee (FOMC) said that the current “policy actions…will contribute to a gradual resumption of sustainable economic growth” and that they had decided to gradually slow the pace of Treasury securities purchases. A reiteration of these statements has the potential to lift risk appetite further, but on the other hand, indications that FOMC members are feeling uneasy about the outlook for growth or the need to expand quantitative easing down the road could do quite the opposite.
On Friday, the US non-farm payroll (NFP) report is forecasted to show job losses for the twentieth straight month in August, though the rate of decline is anticipated to slow further. Bloomberg News is currently calling for NFPs to decline by 227,000, which would be the smallest drop in a year. Meanwhile, the unemployment rate is projected to edge up to 9.5 percent from 9.4 percent, but ultimately, the NFP result will be the event to watch as it is extremely volatile and is one of the sole reports that impacts the US dollar from a pure fundamental point of view.