Global macro overview for 19/06/2017

Global macro overview for 19/06/2017:

American consumers are not that confident after all. The University of Michigan Consumer Confidence Index dropped to a seven-months low in June. Market participants expected the index to increase from 91.1 points to 97.2 points, but it dropped to 94.5 instead (the lowest figure since November 2016). The Current Economic Conditions index declined to 109.6 from 111.7 and there was a 1.1% decline over the year. The Index of Consumer Expectations increased to 84.7 from 87.7 in May, although there was still a 2.8% annual gain. The inflation expectations were unchanged on the yearly basis (2.6%), while the 5-year expectations index rose slightly to 2.6% from 2.4%.

In conclusion, there was a drop of confidence despite a strong job market growth. Moreover, the recent sales report indicated, that both headline and underlying sales declined on the month and the consumer spending is starting to show a poor level of performance on a monthly basis.

One of the reasons might cause political tensions since Trump has been at the helm of the administration. None of the pledges made by Trump during the presidential campaign has been fulfilled so far, which is a main concern for the Republicans. On the other hand, Democrats are worried about the fact, that the chances of tax reforms being passed appeared to have declined.

The Federal Reserve Bank raised the funds rate last week as expected and remained hawkish towards the possibility of a further rate hike this year. The most likely period for the next interest rate hike is December 2017 and until then the FED should keep an eye on the current economic progress in the US, especially job market, wage growth, inflation and the reforms planned by Trump's administration.

Let's now take a look at the US Dollar Index technical picture on the H4 time frame. Despite the hawkish comments from FED, the bulls were too weak to break out above the technical resistance at the level of 97.51 and the price reversed towards the next technical support at the level of 96.84.