According to the US Conference Board today, consumers were more optimistic in May, with the Consumer Confidence Index rising to 102.0 from the upwardly revised print of 97.5 in April.

This marks the first rise in three straight months. Heading into the event, expectations were for the Conference Board’s Consumer Confidence Index to drop from 97.0 to 95.9, accompanied by a forecast range high and low between 101.0 and 91.2. As you can see, the report surpassed the estimate high and consequently underpinned a short-term bid across USD currencies and weighed on US bonds. The Dollar Index continues to test the mettle of its 200-day SMA, a dynamic value that the FP Markets Research Team highlighted as a possible downside target after reacting from the underside of daily resistance at 105.04.

The Present Situation Index, which assesses the current business and labour market conditions, increased to 143.1 from 140.6 in April.

The Expectations Index, established based on short-term expectations regarding income, business, and job market, increased to 74.6 from 68.8. The release noted: ‘Despite this improvement, for the fourth consecutive month, the Expectations Index was below 80, the threshold which usually signals a recession ahead’.

Jobs Were Plentiful

Another key index many watch from this report is the consumers’ appraisal of the labour market which showed moderate improvement. This highlighted that 37.5% of consumers observed that jobs were ‘plentiful’, down from April’s reading of 38.4%; however, there was a slight uptick in consumers’ assessment of how hard jobs are to get, going from 15.5% in April to 13.5% in May.

The overall release shows that consumer confidence has improved, and consumers feel better about the economic conditions. This follows real GDP in the US slowing sharply in the first estimate of Q1 GDP to an annualised rate of 1.6% and retail sales recently coming in flat. Revised data for the University of Michigan Consumer Sentiment was released before the Conference Board’s print, and as of last Friday, the University’s survey showed Consumer Sentiment rose to 69.1, following the preliminary number of 67.4.

1 Rate Cut This Year?

There was little change seen in the OIS curve; investors are still largely leaning towards November’s meeting as a possible date for a 25bp cut, with the year now pricing in around 34bps of easing. We are edging ever so close to 1 rate cut being priced in for the year, which is quite the contrast from the beginning of the year when markets anticipated more than 150bps of easing.