While the euro and pound continue to renew monthly lows and the U.S. government panics as it seeks funds to pay down debt, a survey conducted by the U.S. Federal Reserve shows that the financial well-being of U.S. households in 2022 has declined significantly.
The Federal Reserve Board recently released the results of its Economic Well-Being of U.S. Households in 2022 report. The survey measures the economic well-being of U.S. households and identifies potential risks to their finances. It was conducted last October with more than 11,000 adults.
In the Fed report, it is stated: "The survey found that self-reported financial well-being fell sharply compared to the previous year. The share of adults who said they were worse off financially than a year earlier rose to 35%, the highest level since the question was first asked in 2014. Financial well-being was among the lowest observed since 2016."
It is evident that the surveys were significantly influenced by high prices, although the labor market demonstrated strength. If the situation there had deteriorated sharply, households would likely have been in an even more challenging situation.
The report mentions that a fairly high percentage of respondents reported increased expenses compared to their incomes. Specifically, 40% of adults said their family's monthly spending increased in 2022 compared with the prior year, while 33% said their monthly income increased. Meanwhile, 63% of adults said they would cover a hypothetical $400 emergency expense, down from a high of 68% in 2021. When respondents were asked about the largest expenses they could cover using savings alone, 18% said the largest expense they could cover with savings was under $100. And an additional 14% said the largest expense they could cover was between $100 and $499.
Regarding inflation and its impact on Americans, the Fed report states: "Inflation affected people's spending and saving choices in several different ways. Nearly two thirds of adults stopped using a product or used less because of inflation, 64% switched to a cheaper product, and just over one-half (51%) reduced their savings in response to higher prices. The survey also revealed that 94% have a bank account, but the use of relatively new financial services like cryptocurrency and Buy Now, Pay Later (BNPL) remained low compared with traditional payment and credit methods.
As for the currency market, the latest macro data from Germany has already exerted pressure on the euro, which continues to decline against the US dollar. Regarding the technical picture of EURUSD, the bearish sentiment on the euro persists. To regain bullish sentiment, the levels to defend are 1.0750 and 1.0800. This would allow for a move towards 1.0840 and 1.0870. It would be possible to climb up to 1.0905 from that level, but this will prove to be quite challenging without solid fundamental eurozone data. In case the pair falls, I expect major buyers to be active only around the 1.0750 level. If they are idle there, it would be good to wait for a new low at 1.0720 or open long positions from 1.0670.
Regarding the technical picture of GBPUSD, pressure on the pound remains. We can still expect the pair to rise once traders reclaim control at 1.2420 and 1.2460. Only a breakthrough of these levels will strengthen the hope for further recovery towards 1.2510, after which we can talk about a more significant surge towards 1.2540. In case the pair falls, bears will try to take control below 1.2370. If they succeed, a breakthrough of this range will deal a blow to the bulls and push GBPUSD towards the low at 1.2330 with the prospect of reaching 1.2280.
