Consumer and housing sectors remain bedrock of U.S. recovery

The recent uncertainty in the forex market and dovish Fed Minutes, the market is now expecting the Fed to get cold feet when it meets next month. Fed fund futures now price in only a 28% of a move next month, which compares to 54% at the beginning of August. This has helped the lower-yielding G10 currencies consolidate against the greenback even though it has continued to rally against most EMs. Hence, the Fed's trade weighted dollar index is down only 2% from its recent high. 

"While risks to the September rate view has recently rose, the data surprises still remain upbeat. The recent consumer and housing releases indicate that these sectors remain the bedrock of the US recovery", states CAB Bank. 

U.S. consumer confidence surged in August, rising to 101.5 from 90.9 prior, helped to offset last month's slowdown and points to healthy consumer spending in Q3. Similarly, new home sales recovered in July, rising 5.4% (annualized pace) from a month earlier. This reaffirms the recent uptrend and partially offsets the drop in June.