Consumer spending flattens out after inflation surge
Consumer spending data for September highlights a notable increase, primarily driven by rising expenses in energy and transportation. The flattening of consumer expenditure post-inflation surge suggests a cautious outlook among households, reflecting concerns about discretionary spending amid volatile inflation. This dynamic is pivotal for assessing USD strength as it signals potential shifts in consumer sentiment and economic resilience, particularly with key economic indicators set to be released soon.
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 analysis aligns closely with the cautious sentiment reflected in this range, as firms reassess their positions in light of recent inflation concerns.
How firms align
JPMorgan's latest forecast indicates a target of 1.10 for the EUR/USD, supporting the notion that spending trends may influence currency dynamics favorably. In contrast, BofA positions itself more conservatively with a target of 1.04, reflecting a more bearish perspective amidst ongoing inflationary pressures.
What the data shows
Recent revisions by firms reveal a mixed outlook, underscoring the impact of consumer spending uncertainty on currency strategies. Additional insights can be found in our related research on inflation trends at /research/inflation-impact.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Cautious consumer spending signals potential weakness in USD.
- 02Traders should focus on energy prices' influence on consumer sentiment.
- 03Look for support around 1.075 in EUR/USD; volatility is expected ahead of data releases.
Market implications
In the coming weeks, investors should monitor Eurozone inflation data and any comments from central bank officials that may influence EUR/USD movements. Our consensus number of 1.075 serves as a benchmark for assessing potential shifts in the FX landscape.
Risks to this view
A significant rebound in consumer spending that outpaces inflation could invalidate the current bearish sentiment towards the USD. Additionally, positive surprises in labor market data could lead to a stronger dollar ahead of key economic indicators.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story