While a significant amount of U.S. economic data was released today, the lack of excitement over aid disbursement and a soft debt restructuring for Greece weighed on currencies and equities at the start of the North American trading session. Stocks performed better and the U.S. dollar extended its gains after consumer confidence proved to be stronger than expected. According to the Conference Board, consumer optimism rose to its highest level in 4 years in the month of November. This improvement was a big surprise since the sharp sell-off in stocks between mid October and November caused other sentiment indicators such as the IBD and UMich surveys to decline. The increase in confidence bodes well for the holiday shopping season because it suggests that consumers are not that worried about the Fiscal Cliff. With Black Friday sales hitting record levels this year and spending on Cyber Monday rising more than 25% from 2011, the fiscal cliff isn’t causing any pangs of fear for consumers.
Stronger demand was also seen in durable goods. While the headline number showed durable goods unchanged last month, if we exclude a decrease in transportation orders, demand for products made to last for a few years rose 1.5%. House prices also increased 0.39% according to S&P/Case-Schiller and 0.2% according to the Federal Housing Finance Agency. This softer pace of growth is consistent with the slow improvements seen in the housing market. Aside from the better than expected U.S. data, the rally in the dollar was also fueled by hawkish comments from Fed President Fisher who spoke in Berlin this morning. Fisher called for setting limits on asset purchases and said he believes there isn’t a need for the Fed to do more. As a non-voting member of the FOMC this year, his views have a limited impact on monetary policy.
Nonetheless the dollar is on the rise, particularly against the euro, which is giving up its gains readily. While the deal for Greece represents major progress towards a more stable euro, there are still plenty of unfixed problems in the region.
