Preliminary data on consumer confidence in the US: No good news for Americans

In the United States, the Conference Board's March Consumer Confidence Index will be released today, and market players expect it to shrink to 101 from 102,9 in February. it would be third consecutive decline in consumer sentiment after an encouraging improvement in December, which turned out to be short-lived.

In February, the current situation index increased from 151,1 to 152,9, but the expectations index fell to 69,7 from 76,0 in January. It is worth recalling that readings below 80 often signal a recession in the coming year.

According to the official report, it has been below this level for 11 of the last 12 months. Goldman Sachs estimates the risk of occurrence recession in the US within 12 months at 35% (up from 25%). In addition, a lot has changed since the last report was published. The banking crisis has hit the financial markets and it is likely that this situation has further affected consumer sentiment.

Market participants remain sensitive to headlines about the banking system

The last one to suffer from customer distrust was Deutsche Bank, whose shares fell sharply on Friday, although they managed to recover a large part of their losses on Monday. Meanwhile Federal Reserve The Federal Reserve of the United States (Fed) continued to tighten its monetary policy and, as expected, raised its reference rate by 25 basis points.

Accompanying statement and press conference by President Jerome Powell were read as pigeons, because Powell admitted that he analyzed the situation in the financial system before making the decision, and although the Fed was considering a pause in hikes, the consensus clearly suggested an increase in rates. In addition, policy makers raised the inflation forecast, while economic growth is currently perceived as slower. Finally, the dot plot predicts one more hike of 25 basis points before the break, while rate cuts are being considered for 2024.

Given this, it is possible that the Conference Board Consumer Confidence Index will have a limited impact on financial markets.

USD – possible scenarios

The direction of the US dollar's development is currently strongly linked to market sentiment, which means that a better-than-expected result may work against the safe-haven currency. On the other hand, disappointing data may increase demand for security and trigger short-term dollar purchases. Nevertheless, given the overall weak tone of the data, the chances for stronger growth seem limited for now.

Instead of watching CB Consumer Confidence research, market players are likely to keep their attention on developments in the banking sector and whether governments will provide support to avoid a financial cataclysm.

Technically, the US Dollar Index (DXY) offers a neutral to bearish bias on the daily chart. It hit a low of 101,58 last week before recovering towards the 103,00 level.

A break above this level would mean less bearish pressure, but would not signal a stronger uptrend. For this to happen, the index would have to go above 104,70, ie the maximum on March 15, which is unlikely given the release of consumer confidence data.

Critical support is at 102,25, as it is likely to test the low on its way to this year's low of 100,66 if it breaks below it.