The U.S. Week Ahead (Nov 4-8): Consumers Keep Calm And Shop On

The week ahead will carry additional color into the attitudes of U.S. consumers, with the University of Michigan set to unveil a preliminary gauge of sentiment from its November surveys.

Domestic consumption appears to have helped the U.S. maintain healthy economic growth, with Federal Bank Reserve chair Jerome Powell having extolled consumer confidence and spending gains as “solid”.

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In his press conference Wednesday, following the Federal Open Market Committee’s (FOMC) rate cut announcement, Powell said that the country has had an economy “where the consumer is really driving growth,” amid personal consumption expenditures (PCE) that were nearly 3% this quarter in the first reading.

He added that “overall, we see the economy as having been resilient” to the headwinds that “have been blowing this year.”

Indeed, a recent easing of certain concerns, including a partial, so-called ‘Phase One’ agreement to U.S.-China trade talks, as well as a diminished likelihood of a ‘no-deal’ departure by the UK from the EU, has somewhat allayed investors’ nerves and spurred lower prices of domestic government bonds.

However, uncertainties over a longer-term resolution to U.S.-China trade tensions resurfaced Thursday after Chinese officials raised doubts about an ultimate deal.

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The yield on the U.S. 10-year Treasury note has swung wildly over the course of events, falling roughly 15bps since the FOMC’s rate cut – to its latest bid of around 1.69% intraday Thursday.

Cutting Deeper

The FOMC elected Wednesday to slash the target range for the federal funds rate by another 25bps – its third cut in 2019 – to 1.50%-1.75%, on the back of “weak” business fixed investment and a rate of inflation that has been running below its 2% target.

Fed Chair Powell said that the committee views “the current stance of policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent” with its outlook.

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