16th October 2018
Overnight the USD weakened slightly, resulting in a half cent gain for the AUD.
This is after US stocks rebounded on Friday night after dropping quite dramatically in the middle of last week. The rebound has continued into the start of this week, despite markets still being quite volatile. The market expects this volatility to persist for a little while longer.
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US Consumer Confidence slipped to 99 in October after being 100.1 in September. This is below market expectations of 100.4. This decline comes as a result of consumers having a less favourable assessment of their personal finances after expected interest rate hikes in the future weakened their income expectations.
Inflation expectations for the USA stayed relatively the same, with a slight decline driven by the less favourable assessment of personal finances. In other words, people have slightly less confidence in the economy. Reduced confidence means they won’t spend as much, and reduced demand for goods leads to reduced inflation.
Adding to this negative tone was US retail sales, which increased by just 0.1%, well below expectations of 0.6%.
In other news relating to the US, there has been some tension between US and Saudi Arabia after a Washington Post journalist disappeared inside the Saudi embassy in Turkey. President Trump has also made anti-China comments in a TV interview, reiterating his threats to impose more tariffs and arguing that China is meddling in US elections. The culmination of these factors has lead to the USD being weaker against most major currencies.
On the home front, our little Aussie battler dollar has lifted slightly off the back of this. Currently it is at the top of the narrow trading range it has seen so far this month, sitting around the 0.71 mark against the USD.
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Definitions for those of us playing at home:
Consumer Confidence, or the Consumer Confidence Index
An economic indicator based off a five question survey posed to 5000 households in the USA. It measures their optimism on the economy’s current and future health. If consumers are confident they will spend more, therefore stimulating the economy. Likewise, if confidence declines, consumers will save more and spend less.