United States Consumer Sentiment Drops
Recently released data shows that consumer sentiment within the United States is now at a six-month low. Consumers within the United States are becoming increasing negative about the future of the economy. Data was released to investors around the world on Friday to the disappointment of investors. Employment data from the previous week was also disappointing and indicates that the United States economy is not ready yet for a recovery.
The consumer index dropped to 73.2 for the month of June from its previous level of 79.3 in May. Economists had previously expected June’s report to show a reading of 74.1. Most of the fall in consumer sentiment is among households whose combined income is above $75,000. For lower-income households, consumer sentiment is basically unchanged. Higher-income households believed their income prospects were weaker in June. In May, 37 percent of high income households believed that their income would improve. This number fell to 24 percent in the month of June. Overall, only 9 percent of United States households thought that their incomes would increase in the coming year.
Optimists believe that the newly released data shows a slowdown in growth and not an economic downturn. If the growth slowdown continues, it could decrease the amount of consumer spending as the United States enters the Christmas retail season.
The data coming out of the United States has not impacted the foreign exchange markets yet. Investors are still coming down from their optimism following the Eurozone summit. On Friday morning, the Eurozone’s leaders made a short-term debt deal to help debt-stricken countries to recover from their fiscal crises.
Bank of New York Believes Recovery is Disappointing
According to the Federal Reserve Bank of New York President William Dudley, the momentum of the recovery is slowing down. He believes that the economic recovery has been disappointing so far due to market indicators and a high unemployment rate.
Last week, policy makers in the United States lowered their economic expectations to 1.9 to 2.4 percent. In April, growth had been forecasted at 2.4 to 2.9 percent. During the month of May, the economy added just 69,000 jobs. Economists had hoped for job growth of over 100,000. William Dudley stated that he believed that inflation would be less than the Federal Reserve’s goal of 2 percent for at least a year.
Asian Currencies Continue to Rise
After a tumultuous week of news from Europe and the United States, Asian currencies strengthened this week. According to Bloomberg-JPMorgan Asia, the Asia Dollar Index increased by the most for over eight months during Friday’s trading session. The last time it increased so much was on October 27. The Indian rupee posted the largest increase that it has had for the last three years. The prime minister of India, Manmohan Singh, reiterated his focus on investor confidence yesterday. As a result of this, the currency posted record gains for the fiscal year. By the end of last week’s trading, the Indian rupee advanced 2.7 percent and finished at 55.6375 against the United States dollar.
The central bank in India also stated on June 25 that it would facilitate foreign investment in bonds. Foreign companies and investors can now purchase as much as $5 billion in government bonds and borrow from international markets if they need to make loan repayments in rupees.
In South Korea, the won rose 1 percent this week to finish at 1,145.40 against the dollar. Over in Taiwan, the Taiwanese dollar increased to NT$29.90 or 0.2 percent.
Philippine Peso Performs Well
The Philippine peso also posted gains during trading and advanced 0.7 percent to 42.16. Since the month of May, the Philippine peso has risen 3.2 percent. This marks its largest gain in one month since September of 2010. The economy in the Philippines has grown by 6.4 percent since last quarter. The $200 billion economy is currently growing at its fastest rate since 2010.
Chinese Yuan Rises
This week saw the rise of the Chinese yuan. Even with the recent gains made by the yuan, China’s currency has still closed at its largest quarterly loss since 2005. In 2005, the yuan stopped its peg against the dollar. The yuan was trading at 6.3541 against the dollar by the end of last week. This marked a 0.16 percent improvement over its close on June 21.