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US Consumers Cut Back

Consumer Confidence Numbers Show Americans Concerned About Outlook

american-consumers

Ahead of today’s preliminary growth numbers for the first quarter, the latest consumer confidence figures show that spending might be facing substantial hurdles as Americans tighten the purse strings. The lack of recovery in spending for the lower 80% of income levels shows that obstacles to a more robust period of economic expansion remain.

Consumer Confidence Slump

The latest consumer confidence figures from the Conference Board showed that confidence came in at 95.2 versus 101.4 prior on expectations of the number rising to 102.5. This is the weakest print since 2014 even though spending was expected to climb on the back of lower energy prices. On a positive note, home prices rose across the US by 0.90% month over month and at a 5.00% annualized pace. However, homeownership rates continue to decline after the latest numbers showed ownership at 63.7% versus 64.0% prior, the lowest level since 1986 as America continues to undergo a transition to a rental market. Today’s FOMC Statement and preliminary GDP estimate for the first quarter will likely confirm that the Federal Reserve faces challenging decisions as economic activity contracts. Stocks shrugged off the data, with the S&P 500 and Dow Jones gaining while the Nasdaq Composite trended lower.

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UK GDP Tumbles

In another setback for the Conservative Party as they seek reelection, gross domestic product in the UK fell markedly below expectations. First quarter GDP estimates came in at 0.30%, or half of 0.60% expansion seen in the fourth quarter as annualized GDP came it at 2.40% versus 3.00% prior. The UK FTSE 100 equity benchmark has rebounded moderately from yesterday’s weakness but the possibility of the country’s incumbents losing the upcoming election is adding uncertainty to the outlook. After several years of very difficult policy decisions that have seen the UK economy outperform other global peers by a large margin, the Bank of England is still unable to shift monetary policy as risks remain. There is renewed talk that the Central Bank might choose to consider cutting interest rates as quantitative easing picks up in other developed economies.

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Oil Retreats on Inventories

West Texas Intermediate crude oil prices spiked briefly on the report that the Iran military vessels had fired on a commercial vessel off the coast of the nation, before escorting the ship to the port of Bandar Abbas. The boat flies the flags of the Marshall Islands but contrary to the rumors is not a US ship even though the two nations boast security cooperation. Although oil prices quickly recoiled after the short momentum higher, growing US inventories quickly overwhelmed the deteriorating Gulf security situation. The American Petroleum Institute reported crude stockpiles rose by 4.20 million barrels on expectations of 1.40 million barrel gain. This marks 16-straight weeks of building inventories which is likely to be corroborated by today’s Energy Information Association figures due later in the session. Prices have continued to trend lower as supply concerns outweigh the growing militarism in the Persian Gulf.

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EURJPY Equidistant Channel Technical Pattern

The Euro continues to claw back gains after weakening against major peers on the back of deflationary concerns and Greek exit possibilities. The momentum higher has remained unabated, helped by weakness in the dollar and the Japanese Yen. With Japanese policymakers struggling to maintain their ambitious inflation targets as risks to quantitative easing mount, risks for the Yen remain to the downside at the moment. The EURJPY pair has been trending steadily higher in an equidistant channel formation after bottoming in the middle of the month. The pattern has a bullish bias with trend following strategies suggesting long positions at the lower channel line to be closed at the upper channel line. Any substantial European data misses could foment a breakout from the present channel formation.

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