USD: Consumer story to deteriorate further – ING

Monday’s PMIs surprised on the upside in the US while jumping less than expected in the euro area, helping the euro-heavy DXY index find support into the 104.0-104.50 area. However, the surveys highlighted a growing gap between the contracting manufacturing sector and the rebounding services sector in the US. Markets are keenly watching for clearer signals on where to place activity-related USD bets, ING's FX analyst Francesco Pesole notes.

DXY index finds support in the 104.0-104.50 area

"The Conference Board Consumer Confidence surveys published today are the biggest release for the week in FX. A great deal of the market’s pessimism on US macro has stemmed from soft consumer figures, and the 14.5-point drop in the Conference Board sentiment index between November and February contributed to the major rotation from US to European equities that underpinned the EUR/USD rally. Consensus is rather sparse, but broadly centred around another substantial decline, from 98.3 to 94.0. Our economist expectation is 93.0."

"Even if the drop is a bit less pronounced than expected, markets may struggle to see much silver lining for the dollar. We still think the second half of the week can show more broad-based dollar gains as the 2 April tariff deadline approaches (car tariff details to be unveiled this week) and core PCE at 0.3% MoM (Friday) can keep a cap on dovish Fed bets. But for today we see mostly downside risks for the greenback."

"The US calendar also includes new home sales for February, which are expected to be quite strong, and the Richmond Fed Manufacturing index, which may well fall back into negative territory given the PMI indications."