Improving consumer statistics supported the US dollar to rise against other currencies in the market, even though Americans have become less optimistic about the economy due to the increasing risk of another pandemic wave in the United States. Nonetheless, this fairly good report proves the correctness of the Federal Reserve's approach and timely response to the situation.
According to the report published by the New York Fed, consumer expectations have dropped amid increasing risk of another pandemic wave, in which respondents had said that they are not and will not be comfortable in crowded places, which could affect the volume of retail sales as well as the functioning of the service sector. Huge problem also arises from the lack of fiscal support from the government, as household expectations that the government will continue to support them play a rather important role in economic recovery.
Just recently, US President Donald Trump said that he is ready to sign a decree on additional measures to stimulate the economy, but on the condition that a separate project is given to him, which is issuing $ 1,200 to Americans. He also mentioned the need to support airlines, to which he plans to allocate about $ 25 billion. Support for small businesses was also included, where Trump plans to send about $ 135 billion under the payroll protection program. However, until now, Republicans and Democrats have not found a consensus yet on this issue.
Meanwhile, a more positive report was published by the University of Michigan, which recorded an increase in the consumer sentiment index. According to preliminary data, the indicator rose to 81.2 points in October, up from the forecast of only 80.5 points. Unfortunately, the index of current economic conditions fell to 84.9 points in September, but the index of economic expectations jumped to 78.8 points.
The data on US retail sales also came out much better than the forecast, as the report from the US Department of Commerce indicated a 1.4% jump in September, higher than the expected 0.7%.
However, the volume of industrial production fell after a four-month growth, though this is not really a cause for concern since the decline in the indicator is mainly due to a decrease in demand. Thus, the latest report said industrial production fell 0.6% in September, while economists had expected an increase of 0.5%. The utilization of industrial capacities also fell to 71.5% from 72% in August.
As for the US budget deficit this current financial year, it already reached a record amount of $ 3.1 trillion, much higher than its figure last year, which was only $ 984 billion but already caused quite a lot of controversy and criticism. This year though, such a high figure does not cause much concern, since most likely, the deficit will only continue to grow, especially given the fact that another aid package will still be adopted. Anyhow, the current deficit is already 16.1% of GDP, and its main contributor was the government's spending on the fight against the coronavirus. If we compare income and expenses, budget revenues for the reporting period to $ 3.4 trillion, which is only 1.0% less than in the previous financial year. However, spending jumped to $ 6.5 trillion, or 47%, and the huge part of it falls on loans to small companies, as well as the payment of additional unemployment benefits for American households. In just a year, the national debt grew by 25% to $ 21 trillion, which is 102% of GDP.
With regards to the EUR / USD pair, its further prospects are rather uncertain, especially since on every upside attempt, the bulls are faced with major sell-offs from the bears, which keeps the quote in a downward price channel. However, continuing a bear market requires a breakout from the support level of 1.1690, as such will provide the market with new inflows of sellers who can push risky assets to the lows of 1.1640 and 1.1580. Specific prospects for the recovery of the euro will emerge only after a breakout from the resistance level of 1.1760, and only this scenario will lead to a new wave of growth in the EUR / USD pair to the highs of 1.1800 and 1.1865.
As of the moment though, long positions are low in the market, and this is because traders are taking a wait-and-see attitude due to the current weak outlook for the euro, as well as the expectations of a new monetary stimulus from the European Central Bank and a new wave of COVID-19 in many EU countries. In the latest commitment of traders report, there was a decrease in long positions and an increase in short positions, which led to an even greater decrease in the positive delta. This indicates the more selective approach of traders in the market.
