FX.co ★ Hints of a decline in Americans' spending on personal consumption may stimulate the growth of stocks and the decline of the US dollar

Stock markets increased in Europe and North America as a result of trading on Thursday. This also stimulated positive movements in the Asian stock markets.

Why did this happen? Is it because the published data of important economic indicators, primarily in the US, were not so clear?

It can be recalled that the GDP figures for the 1st quarter were released yesterday, which were in line with the forecast and confirmed the growth of the US economy of 6.4%. However, this is the only positive news. In turn, the basic orders for durable goods and their volumes, as well as the number of applications for unemployment benefits last week, came out worse than expected.

So what is the reason for the growth in the markets?

We believe that investors are starting to act in the current conditions using the opposite method. They seem to believe that the real problems in the labor market, the drop in demand for durable goods, as shown by the figures of basic orders for durable goods, indicate that the US economy is still far from the point of overheating, which could really force the Fed to decide to change the monetary course – from the current super-soft to a tougher one. The situation indicates that investors are really becoming confident that the Fed will not change the course of monetary policy in the near future on the wave of negative trends in the national economy. Generally, this news is positive for the demand for company shares and for risky assets.

As for the currency market, the movement continues in a very narrow range of the ICE dollar index, which reflects the dynamics of the US currency rate against a basket of major currencies. Investors are expecting important data on inflation indicators – the basic index of US spending on personal consumption, as well as the value of income and expenses.

It is assumed that the basic index of personal consumption expenditures in May added 0.6% against an increase of 0.7% in April. The indicator should grow sharply by 3.4% against 3.1% a year earlier in annual terms. If the data show a slight slowdown in consumption and a decline in American spending, this may serve as an incentive for the continued growth of stock indices in America, then in Europe and Asia. In view of this, the US dollar is likely to be under pressure against major currencies. The price of gold will also receive support.

Forecast of the day:

The AUD/USD pair shows a recovery amid investors' positive attitude to risky trading. Its growth above the level of 0.7600 will lead to its further rise to 0.7650.

The NZD/USD pair is also rising amid the improving market mood. It is trading above the level of 0.7065. A consolidation above it will allow the pair to further rise to 0.7150.