By Yasin Ebrahim
Investing.com – The dollar eased on Tuesday as a drop in consumer confidence caused investors to worry about the pace of the recovery and set off data showing a drop in the number of new US infections.
The one that measures greenbacks strength against a trade-weighted basket of six major currencies fell 0.22% to 93.88.
Dollar struggles come in the wake of economic data suggesting that the strength of the U.S. consumer, which is the backbone of the economy, may be on the way.
The Conference Board’s consumer confidence gauge unexpectedly fell to 84.8 this month from 91.7 in July, missing economists’ forecast for a reading of 93.
While the decline is not expected to affect consumption in the third quarter, some warned of a threat to growth in the last quarter of the year.
“The decline in confidence and household cash flows does not prevent a huge increase in consumption in the third quarter, because the base effect created by the jump in March and April and the subsequent rebound is enormously strong, but it threatens Q4,” said Pantheon Macroeconomics.
The weak day for the greenback comes in the wake of declining coronavirus cases in the US from a peak seen just a few weeks ago, which many have attributed in part to the weakness in the world’s reserve currency.
“Since the end of July, the number of cases in the United States has shown a significant downward trend. Recently, however, the infection rate – average new infections per 100,000 inhabitants in the last 7 days – has remained constant at around 13,” Commerzbank (DE 🙂 said .
Greenback will come under extra focus later this week on Thursday when Federal Reserve President Jerome Powell is scheduled to present the results of the central bank’s review of its monetary policy strategy in a speech at the Fed’s virtual conference. This conference is usually held annually in Jackson Hole, Wyoming.
The central bank launched the audit almost two years ago in an attempt to meet its policy objectives more effectively, as the low inflation rate is a key problem among decision-makers.
Average inflation targeting, which would allow exchange rates to run above the central bank’s 2% target, has been at the heart of the Fed’s policy framework survey, in which the central bank is largely expected to adopt some form of average inflation targeting at the September meeting. The move would free the Fed from its 2% inflation target set in the 1980s in an attempt to pursue clearer policy targets.
Overall, many expect the Fed chief to lean his ass and reiterate support for an ongoing expansion of monetary policy to ensure that economic recovery remains on track.
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