US Consumer Confidence Rebounds Unexpectedly, but Fails to Boost US dollar

US CONSUMER CONFIDENCE KEY POINTS:

• March U.S. consumer confidence rises to 104.2 from 103.4, topping estimates calling for a decline to 101.00
• The small rebound in sentiment can be attributed to a moderate recovery in the expectations index
• The U.S. dollar retains a negative bias as markets remain focused on the U.S. banking sector woes and their implications on the Fed’s hiking path

Read More: US Dollar Outlook – Path of Least Resistance is Lower after Fed Ditches Hawkish View

A popular gauge of U.S. consumer attitudes unexpectedly rebounded in March after two straight months of declines, signaling that Americans are becoming a bit less pessimistic about the outlook despite the recent turmoil in the U.S. banking sector, coupled with persistently high inflation.

According to the Conference Board, consumer confidence climbed to 104.2 in March from an upwardly revised reading of 103.4 in February, topping consensus estimates calling for a retreat to 101.00.

Looking at the survey’s internals, the present situation index, based on the assessment of business and jobs market conditions, eased to 151.1 from 153.00, but the expectations gauge, which tracks short-term prospects for income, the business environment, and employment opportunities, staged a moderate recovery, advancing to 73.0 from 70.4 previously.

US CONSUMER CONFIDENCE CHART

Source: Conference Board

Better-than-expected sentiment numbers suggest that household spending could remain somewhat resilient over the coming months, thanks in part to the solid labor market. In any case, the headline confidence index remains well below levels that are often associated with a healthy and dynamic economy. This may be a sign of economic troubles to come over a longer-term horizon.

The U.S. dollar, as measured by the DXY index, whipsawed after the survey’s results crossed the wires, but retained a negative bias on the session as markets continued to focus on the banking system woes following the collapse of SVB and SBNY.

While expectations remain in flux, many traders believe that the Fed is done hiking and that policymakers will soon pivot to cutting interest rates during the second half of the year to counter tighter credit conditions. If confirmed, this scenario is likely to create headwinds for the U.S. dollar.

US DOLLAR INDEX (DXY) 5-MINUTE CHART

Source: TradingView