The US dollar dips as consumer confidence worsens. Consumer confidence in the United States fell for the second straight month in Feb, falling short of expectations for a pullback to 108.5.

The significant drop in the headline index can be related to a significant decline in the survey’s perceptions factor.

US dollar on CB consumer sentiment

A popular measure of consumer sentiment in the United States dropped drastically in Feb. Worsening for the second consecutive month. Implying that Americans are becoming more pessimistic about the economy in the face of stubbornly rampant inflation and faster-increasing interest rates.

Consumer confidence slipped to 102.90 this current month from 106.00 in Jan. Missing consensus estimates of a modest rebound to 108.5 and reaching its lowest point since Nov 2022, as reported by the Conference Board.

Having a look at the survey’s individual elements, the present situation index rose to 152.8 from 151.1. Though, the expectations indicator measures near-term potentials for earnings. The business environment, and job opportunities, dropped to 69.7 from 76.00 earlier.

US CONSUMER CONFIDENCE GRAPH

Source: Conference Board

US dollar weakens on likely consumer confidence

Worse-than-expected sentiment data indicate that consumer spending could start to worsen at any time Increasing the probability of a slump, as household consumption accounts for the vast bulk of U.S. GDP.

As assessed by the DXY index, the US dollar enlarged and decreased after the survey findings were released. At the same time, US Treasury yields pared their session gains.

Markets have re-evaluated Fed’s policy

Markets have revalued faster the path of the Fed’s monetary policy prospects in recent weeks, due to robust economic figures. Views may change soon if the plunge in confidence causes a significant turnaround in consumer expenditure.

Source: TradingView

In the short term, the USD will continue to fall.

The USD is trying to trade infused vs the major currencies, but it retains a soft undertone overall, Implying more USD vulnerability in the short run.

The Strength of the dollar fundamental issue lies in the fact that the supportive yield plot. That has fueled advances throughout the majority of the span of a month.

Though, it is a little less convincing now. As markets price other central banks (mainly, the BoE and ECB) somewhat more forcefully. Month-end streams could offer a little assistance for the USD during the period.

Further gains are still aimed at 105.60.

Despite the ongoing corrective move, the current price action favors the continuation of the uptrend. Further bursts of strength should then clear the Feb high of 105.35 (Feb 27). Paving the way for a possible contest to the 2023 peak of 105.63 on Jan 6.

Since US data may not move the market significantly today, worldwide risk sentiment may primarily affect the dollar.

In such a worsening valuation environment, We find it difficult to see a material and sustained recovery in global equities.  With data still promoting the Fed’s hawks, for the time being, The Dollar’s near-term likelihood stays neutral and bullish. In the ISM services publication on Friday, a return above 105.00 in DXY appears possible.

Technical Perspective and Key Levels

In the long term, the index remains bearish, despite falling below the 200-day SMA at 106.49.