Dollar on the rise after Consumer Confidence slump

European markets have failed to follow their Asian counterparts higher for a second consecutive session, as the boost felt from the PBoC’s stimulative measures start to fade. Notably, the early gains seen for the Shanghai and Hang Seng have lost much of their momentum, with initial 3% upside falling back to end roughly 1% higher. While markets have clearly enjoyed a welcome boost off the back of a surprisingly comprehensive set of measures announced by the PBoC, we are ultimately left wondering whether it will resolve the stuttering growth story or simply provide a short-term boost to sentiment.

The dollar has been on the rise since yesterday’s collapse in the consumer confidence survey, with the conference board release figure dropping from 105.6 to 98.7 in September. Unfortunately, this feeds back into the narrative around a potential slowdown in the jobs market, with the survey seeing a decline in the percent of consumers seeing jobs as plentiful, as the “hard to get” figure rose. This brought fresh concerns over a potential surge in US unemployment, while we saw a rise in the number of consumers that believed the US was already in a recession. For markets, the prospect of a hard landing brings fresh concerns over the direction of earnings, although the rising expectations of a 50bp November cut from the Fed does help to counterbalance some of the risk-off consequences.

The Australian inflation report helped bolster support for a December rate cut, despite a steadfast approach to driving down CPI from the RBA earlier in the week. The slump from 3.5% to 2.7% brought us to the lowest level in almost three-years, easing inflation concerns that had only recently brought questions over whether we should see further tightening from the RBA.