The recent shift away from uniform low-interest rates by central banks means that economic data can have more impact on FX than it has previously. At the moment US growth and inflation economic data have been in key focus. On Wednesday we were looking for a miss in the US CPI data to send the USD lower. We noted at the time that, ‘if the headline comes in below minimum expectations at 8.5% and the core is below 6% then markets will breathe a sigh of relief that the Fed is under less pressure to hike rates by 75 bps in September. This can result in a move lower in US10 year yields, USDJPY lower, pushing XAGUSD and XAUUSD higher’. The market reacted exactly as anticipated on the soft print.

The US consumer confidence is likely to offer another intraday trading opportunity as US consumer confidence is released on Friday at 1500 UK time. This reading is the preliminary reading for August, so it is an early indication of how the US consumer is feeling. Some analysts really favour the US Michigan Consumer Expectations print as an indicator of a slowing US economy. The rationale, which makes sense, is that households are quicker to feel the economic pinch than companies necessarily are.

So, this means that a miss in consumer confidence is likely to hit the US growth outlook. We know the Fed is concerned about slowing growth, it mentioned it in its last meeting, so here are the typical reactions to likely expect.

The best opportunity will most likely come if consumer sentiment comes in below minimum expectations of 49.5 and consumer expectations below minimum expectations of 46. In this case, we would expect the following likely reaction:

  • US 10-year yields to fall
  • USDJPY selling
  • GBPJPY & EURJPY selling
  • Gold and silver buying

One caveat to watch is the current conditions print. Ideally, for the above outlook, we would need to see current conditions drop below 52.5 and inflation expectations around the projected 5.1%.