Dollar Falls Slightly as Consumer Confidence Falls
March 28, 2018 7:41 amVideo
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The dollar dropped slightly following the Consumer Board’s Consumer Confidence data. The data showed that in February, the confidence of consumers declined to 127.7. This was lower from January’s 130 and from the analysts’ forecast of 131. Had the confidence number rose in the month, it would have been the third consecutive month of gains.
After the release of the data, the dollar index fell slightly. Earlier in the day, it was surging after reports emerged that the Trump administration was negotiating with China on trade issues. A breakthrough in talks would be good news for the administration which has in the past decried the poor treatment of American firms in China. The dollar index had risen by more than 0.50% following the news.
As you recall, the consumer confidence surged after the election of Donald Trump. Consumers were hopeful that his policies on taxes, deregulation, and Obamacare would help them. To a large extent, he has achieved some of the goals. On taxes, he delivered the largest tax cuts in the American history. On deregulation, his administration has done away with hundreds of regulations, and on Obamacare, he has ended the individual mandate. The mandate ensured that all people paid for the insurance policies and failure to would result in a penalty.
However, the administration continues to face many challenges. The president is being investigated by the Special Counsel Robert Mueller for obstruction of justice and for colluding with the Russians. The president has been unable to hire quality lawyers because he believes he is his best lawyer. He has been abandoned by several of his key officials including his former body guard Keith Schiller and communications director, Hope Hicks. He has also faced multiple attacks from women including the adult film star Stormy Daniels.
In addition to all this, he has moved to implement hardline positions on trade. A few weeks ago, he announced that he would start charging a 25% tariff on steel and 15% on aluminum. Last week, he announced that he would levy tariffs on Chinese goods worth more than $60 billion. If he did this, it would harm the American consumers who would be charged more on every day products because China is the biggest producer in the world.
Perhaps, these factors have played a role in the consumer confidence which is a closely followed number. Investors believe that highly confident consumers lead to more consumer spending. This is because they are usually confident about their future and that of the prices. As such, they tend to spend more and raise earnings of companies. A decline is a red flag.
Meanwhile, in the EU, data from the Eurostat showed that the Economic Sentiment declined in February. In the Eurozone, it dropped by 1.6 points while in the EU, it dropped by 1.9 points. This was the third consecutive fall of the index. As a result, the euro fell against the major currencies except the Japanese Yen.
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