The US dollar ended Tuesday mixed, but the Japanese yen was the strongest of the majors as the S&P 500 was unable to break Monday’s highs and closed down 2.56 points at 979.62.
Looking to the day’s data, the Conference Board’s index of US consumer confidence fell more than expected for the second straight month in July to 46.6 from 49.3. A breakdown of the report indicates that weak labor market conditions are the primary reason for the decline, as consumers thought that employment was increasingly hard to get and that conditions would remain this way over the next 6 months. Furthermore, additional people anticipated that their income would decrease during the next 6 months, boding especially ill for consumption growth. Meanwhile, inflation expectations for the next 12 months have fallen to 5.5 percent from 5.9 percent, the lowest since February 2008.
On the other hand, the S&P/Case-Shiller US house price index rose 0.45 percent in May, the first increase in nearly three years, adding to the variety of positive housing market reports we’ve seen lately. Also, the Federal Reserve Bank of Richmond’s measure of manufacturing sector activity jumped to a nearly 2-year high of 14 in July from 6. The increase was much larger than anticipated, as new order volume rocketed to the highest level since March 2004. However, the sharp improvement in manufacturing conditions was really only contained to the Richmond Fed region in July, as both the Philadelphia Fed and Empire (NY) manufacturing indices remained negative during the period.
Wednesday’s release of US durable goods orders is projected to show a 0.6 percent decline in June following a 1.8 percent jump in May, and excluding transportation the index is forecasted to stagnate. While the headline result will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. This component surprisingly rose in May, and a continuation of this dynamic would be supportive of outlooks for a slow recovery in the US economy.
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