Consumer Confidence, Housing Prices Show Two Sided US Recovery

Once again, US economic data was released relatively mixed, showing further evidence that the world’s largest economy continues to churn away at different speeds. The notion has kept speculation alive of a sustained pace of monetary stimulus by the Federal Reserve, supportive of gains by major currencies like the Euro.

Lower Pay, Lower Confidence

Sentiment among US consumers dipped in the month of January, according to the index published by the Conference Board. The survey dipped to 58.6 from a revised December reading of 66.7 – the weakest in more than a year. Subsequently, the release disappointed market estimates, falling below the average expectation of 64.

Attributed to the drop off seems to be the reality of lower take home pay as a 2% increase in the payroll tax has left US consumers with less disposable income in their pockets. The expectations component additionally plunged, bolstered by a relatively negative outlook over the country’s employment prospects.

Unfortunately, the sentiment report is beginning to support the notion that consumer spending will likely dip following a relatively stronger fourth quarter result.

Housing Prices Stabilize, For Now

The lower sentiment figures were offset by data that showed stabilization in the US housing sector. According to the S&P/Case-Schiller index of property values, home prices rose by 5.5% in the annualized comparison. The largest gain in over 5 years, the spike up in home prices was likely spurred on by continually depressed mortgage rates – which continue to remain at record lows.

The notion should ideally keep tepid demand for US housing supported in the near term, bolstering already heightened suspicions that the US housing sector will continue to add to US expansive potential in the short term.

What To Consider Next

Given the comparative directions in today’s reports, it’s likely that speculation will continue to side with further monetary stimulus by the Federal Reserve. The notion should prompt further US dollar selling in the short term, particularly against the Euro.

With the 1.3500 psychological figure in sight, bulls are likely to give it their all to penetrate the figure. Upside violation of the barrier would likely open scope for a surge higher towards subsequent resistance at 1.3809.
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