US Dollar Starts Week on a Bearish Note as Consumer Sentiment Dips Sharply

US Dollar Starts Week on a Bearish Note as Consumer Sentiment Dips Sharply

Posted Monday, August 16, 2021 by
Aiswarya Gopan • 1 min read

The US dollar is starting the fresh trading week on a bearish note, holding close to the lowest levels seen since a week after US consumer confidence posted the sharpest drop in nearly two months. At the time of writing, the US dollar index DXY is trading around 92.55.

Over the past week, despite the rising expectations for the Fed to consider overturning its dovish stance soon, the dollar index posted a decline by 0.5%. The dip came on the back of UoM consumer sentiment falling to 70.2 for the first half of August, significantly lower than July’s reading of 81.2. Consumer confidence posted a steep decline as COVID-19 cases continue to rise across the US due to the delta variant.

Later this week, the focus shifts of US retail sales to get a more clear sense of consumer behavior across the most powerful economy in the world. The US economy is heavily driven by consumer consumption and a cautious outlook towards spending can put a severe dent in economic recovery from the pandemic.

Estimates by Wells Fargo expect retail sales to slow down during the month of July, posting an increase by only 0.1% YoY against June’s reading of a 0.6% growth instead. The spread of infections due to the highly contagious Delta variant have made consumers more wary about shopping, hurting sales during the peak summer season.

Meanwhile, the Fed will also remain in focus, especially with investors eagerly looking forward to the Jackson Hole Symposium later this month for clues on the timeline by when the US central bank could start tapering its asset purchase program. A confirmation that officials could embark on such measures within this year could drive bullish moves in the US dollar against its major peers and support its strength.


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