Americans get back to their spending ways. Economy might be speeding up again.
The latest data indicates a rebound in consumer spending in August, suggesting that the U.S. economy may be picking up pace despite existing pressures. This development could bolster the outlook for the dollar, signaling to FX participants that U.S. economic resilience may lead to tighter monetary policy expectations. As consumer activity strengthens, traders may reassess their positions ahead of upcoming economic indicators and Federal Reserve communications.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). Marketwatch's report on increased consumer spending aligns with the more optimistic forecasts from firms like JPMorgan and ING, who anticipate strengthening economic fundamentals in the U.S.
How firms align
Goldman Sachs remains bullish on the dollar, predicting a target of 1.12, while BofA's more cautious view places their target at 1.04, reflecting potential concerns over U.S. economic sustainability. This divergence suggests varied interpretations of the economic data, with our internal consensus leaning towards positive signals.
What the data shows
Recent revisions indicate a potential uptrend in consumer sentiment and spending patterns, with firms adjusting their forecasts to reflect a stronger economic backdrop. Key insights can be explored further in /research/consumer-spending-trends.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01U.S. consumer spending rebounded in August, hinting at economic acceleration.
- 02A stronger dollar could emerge as market sentiment shifts towards growth.
- 03Traders should monitor Federal Reserve signals as catalyst for USD movements.
- 04Watch for potential revisions in growth forecasts from major firms.
Market implications
Investors should keep an eye on the upcoming job report and inflation data, which could provide critical context for the dollar's direction. Our consensus number at 1.075 is underpinned by the forecasted acceleration in U.S. economic activity.
Risks to this view
Any reversal in consumer sentiment or unexpected economic data may undermine this bullish outlook on the dollar. A weak jobs report or elevated inflation could prompt reconsideration of economic growth expectations.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.65
Sources & References
How we cover this story