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US Consumer Optimism Climbs

Positive Economic Data Boosts Confidence in Outlook

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Recent US data points to renewed confidence in the outlook for the economy with rising consumer optimism helping to bolster sentiment. Alongside the Federal Reserve’s recently announced rate hike cycle, the Conference Board’s consumer confidence index reading rebounded to 96.5 in December after November’s revised 92.6 print.

Sterling Slips

The US dollar rallied over a basket of major currencies ahead of the last major economic data due before the end of the year. Despite softening versus major peers after the Federal Reserve decided to hike interest rates on December 16th, the US dollar continued to gain against the Pound Sterling, reaching a multi-month low of 1.4784 before rebounding modestly to the upside.  Recent gross domestic product values obtained for the third quarter indicated a slowdown in the UK economy while recent mixed data have points have served to weaken the Pound even further. As a result of decelerating growth and low inflation, the Bank of England has kept monetary policy unchanged and is unlikely to move on interest rates until inflation expectations are anchored, keeping pressure on the Pound.

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Consumer Confidence Gains

The Conference Board reported consumer confidence bouncing to 96.5 compared to November’s revised 92.6, beating estimates of 93.8. With the US unemployment rate steady at 5.00% and job creation continuing to show improvement, US citizens appeared more optimistic with respect to current conditions and the outlook for the economy. Declining oil prices have translated to lower gasoline prices which when combined with wage and salary growth have also boosted disposable income levels, adding to consumer spending tailwinds. Improved consumer confidence was also reflected in the latest Central Bank decision with the Federal Reserve hiking rates to 0.50% based on conviction in the country’s continued economic recovery.  Equity benchmarks rallied across the board during the cash equity session with the Nasdaq Composite leading peers to the upside, gaining 1.33%.

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European Stocks Back on Track

European shares moved upwards after the Christmas holiday break, continuing recent bullish momentum higher despite seasonally low trading volumes. The FTSE 100 climbed 0.96% to 6314.57 while other European indices, such as the German DAX and the French CAC, mirrored the upward trending motion, with gaining 1.94% and 1.81% respectively. The UK construction sector in particular was stronger due to the damage caused by recent weather conditions such as the floods that are occurring in the northern regions.  Miners were the biggest drag on the index as prices for aluminum and copper keep declining despite oil prices having stabilized for the time being. Further losses in the Pound and Euro will continue make equities more attractive, with the Bank of England and the European Central Bank focused on keeping monetary policy accommodative in order to stimulate growth.

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Spanish Retail Improves Ahead of Christmas

The National Institute of Statistics reported rising retail sales in Spain for the month of November. After an annual revised 6.00% expansion recorded during the previous month, the figure only rose 3.30%, missing median estimates of 4.60% but nevertheless marking the 16th consecutive monthly increase. In particular, the data showed growth in non-food products including household equipment, gaining 4.40%.  The drag was mostly due to the decline of food products which contracted by -0.20% during the latest period. With the Spanish economy adding jobs and showing improvement, household spending has reflected the more optimistic outlook. Furthermore, the decline in oil prices has improved Spanish consumers’ disposable income levels while low inflation and reduced taxation have also boosted growth in the region in spite of the dramatic political problems.

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