Dollar Looks for Fed Outlook Cues in Consumer Confidence Data

The US Dollar is looking to May’s Consumer Confidence data to inform Fed monetary policy expectations, with a supportive outcome likely to boost prices.

Talking Points

US Dollar May Rise if Consumer Confidence Data Boosts Fed QE Reduction Bets
Japanese Yen Sold in Asia as Prices Correct After Three Days of Aggressive Gains

Looking ahead, a quiet economic calendar in European trading hours is likely to see traders looking ahead to May’s US Consumer Confidence data as the next key inflection point. Economists’ forecasts suggest the index will rise for a second consecutive month to reach the highest level in six months.

An increasingly firm link between the US Dollar and the 10-year US Treasury bond yield suggests the outlook for Fed policy is in focus. With that in mind, a supportive outcome may drive bets on a reduction in the size of monthly QE purchases and boost the greenback. US news-flow has tended to underperform relative to expectations since late March and technical positioning is worrisome, leaving the door open to the downside scenario.

The Japanese Yen declined in overnight trade, trading down as much as 0.8 percent on average against its leading counterparts. A singular catalyst for the selloff did not present itself, suggesting it likely amounted to a correction in the wake of three days of consecutive Yen gains that brought to the currency to the highest level in a month.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index

Asia Session:

GMT

CCY

EVENT

ACT

EXP

23:50

JPY

Corporate Service Price (YoY) (APR)

-0.4%

-0.2%

0:00

CNY

Leading Index (APR)

99.8

–

100.0

5:00

JPY

Small Business Confidence (MAY)

–

50.0

49.4

Euro Session:

GMT

CCY

EVENT

EXP/ACT

IMPACT