Consumer Confidence Quick Analysis: Downfall adds to recession fears, USD could benefit

CB Consumer Confidence missed with 124.1 points in March.
The data point fuels fears of a recession in the US.
The US Dollar and the Japanese yen are set to benefit.

Yohay Elam FXStreet

The Conference Board's Consumer Confidence measure for March unexpectedly dropped to 124.1 points from 131.4 in February. It contrasts the preliminary figure from the University of Michigan for the current month which beat early expectations and advanced.

The "Present Situation" measure suffered a downfall from 173.5 to 160.6 while Expectations slid from 103.4 to 99.8.

Consumer confidence is considered a leading indicator of actual consumption. We will receive retail sales numbers for March only in April. The data is now similar to that seen in January when the government shutdown weighed on consumers' moods.

The drop may be genuine due to a slide in the economy. It may also be related to the latest slide in stocks that was fueled by talk of an upcoming recession after the yield curve inverted.

The reason for the retreat does not matter.

The worrying data point joins unimpressive Housing Starts and Building Permits, which both missed expectations for February. Together with the Fed's forward-looking dovish decision, they paint a more gloomy picture of the economy in the future, and that has an impact of its own.

History shows there is a lag between the yield curve inversion and a recession. The Conference Board's figure may raise fears that the chances of the downturn are higher and perhaps that it will come earlier.

The talk itself has an effort on confidence and it may turn into a feedback loop and become a self-fulfilling prophecy.

In currency markets, safe-haven assets are the beneficiaries. The ultimate safe-haven is the Japanese yen, but the US Dollar also enjoys demand as the world's safe-haven currency. The Swiss franc comes a distant third. However, Gold may be a better bet.

More: Gold Price Forecast: Why it is rising on US recession fears and the big levels to watch

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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