The US dollar fell to a record low against the euro yesterday.
That was despite robust US consumer spending in August, as reported by Bloomberg yesterday.
Consumer spending in the U.S. rose more than forecast in August...
The 0.6 percent rise in spending was the biggest in four months and followed a 0.4 percent increase in July...
Incomes increased 0.3 percent in August after 0.5 percent...
Other indicators were generally also relatively robust.
The National Association of Purchasing Management-Chicago's index of business activity rose to 54.2 in September, from 53.8 the previous month. The Reuters/University of Michigan measure of consumer confidence was 83.4 this month, remaining at the lowest level in a year. Construction spending unexpectedly rose in August, led by factories, hotels and offices, another Commerce Department report showed.
Markets apparently focused on a slowing inflation rate.
The report's price gauge tied to spending patterns and excluding food and energy costs, the Fed's preferred measure, increased 0.1 percent in August for a sixth consecutive month. It was up 1.8 percent from August 2006, the smallest gain since February 2004.
Possibly, markets also noted that Fed hawks have been sounding more like doves, according to MarketWatch.
Two members of the inflation-worrying hawkish camp of the Federal Reserve indicated Friday that they were more focused on the downside risks to economic growth from the recent financial market turmoil than inflation.
Dennis Lockhart, the new president of the Atlanta Federal Reserve Bank, said that the balance of risks to the economy had shifted in August and September from higher inflation towards slower real growth...
In a separate speech, William Poole, the president of the St. Louis Federal Reserve bank, said the [Fed] stands ready to cut rates again to keep the economy on a moderate growth track in the face of the financial market turmoil.
But it not exactly clear that the euro zone is headed for tighter monetary policy soon either. From Bloomberg yesterday:
European confidence in the economic outlook dropped to a 16-month low in September and inflation accelerated above the European Central Bank's ceiling as borrowing costs climbed and oil prices reached a record.
An index of sentiment among executives and consumers in the 13 nations that use the euro fell to 107.1 from a revised 109.9 in August, the European Commission in Brussels said today...
Consumer prices this month rose by 2.1 percent, the most in 13 months, up from 1.7 percent in August, according to a provisional reading by Eurostat...
Joining in the global gloom in sentiment is the UK, where GfK NOP's consumer confidence barometer fell to -7 in September from -4 in August.
But things are looking up in Japan. Bloomberg reports:
Japan's industrial output surged at the fastest pace in almost four years and household spending rebounded, signaling the economy may weather a U.S. slowdown.
Production rose 3.4 percent from July to a record, the Ministry of Economy, Trade and Industry said in Tokyo today. Spending by households climbed 1.6 percent from a year earlier, beating forecasts for a 1.2 percent gain...
Spending by households rose even as the jobless rate increased to 3.8 percent in August from a nine-year low of 3.6 percent in July, according to separate data released today...
Meanwhile, consumer prices excluding fresh food fell 0.1 percent in August from a year earlier, a seventh monthly drop, as retailers absorbed higher costs to attract customers.
Tokyo's core prices, an indicator of the nationwide index, fell 0.1 percent in September, the government said today...
Retail sales unexpectedly rose the first time in three months as demand for clothing and autos increased, the Trade Ministry said today. Sales climbed 0.5 percent in August from a year earlier...
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