U.S. Dollar Spikes Higher on Strong Consumer Confidence

The financial markets primarily treaded water on Tuesday as the lack of major economic reports shifted investor focus to Friday’s important U.S. Non-Farm Payrolls report. Volume and volatility were also low due to the next Monday’s U.S. Labor Day holiday, which for some means an extended week-end. Trading is traditionally light this week since it marks the last week of summer and the last chance to get away from the markets before the September Fed meeting and the November U.S. elections.

Gold prices inched lower on Tuesday as investors reacted to the slightly better U.S. Dollar. Gold prices are also being capped by last Friday’s hawkish comments from Fed Chair Janet Yellen and Fed member Stanley Fischer. Yellen, said the economy had strengthened, but offered no clues that a rate hike was imminent. Fischer said that two rate hikes in September and December were still a possibility.

Silver prices were also lower after hitting a two-month low on Monday. Platinum posted a 1.15 percent loss and palladium was down as much as 1.74 percent before stabilizing.

The EUR/USD was under pressure, however, the GBP/USD was trading flat. Both the Euro and British Pound were under pressure due to concerns over U.S. interest rate policy. However, the Sterling was able to pick up a bid as investors considered the possibility that the Bank of England would refrain from a rate cut at its next meeting on September 15.

Crude oil prices were supported earlier in the session from production suspensions in the U.S. Gulf of Mexico due to an expected tropical storm and that producers meeting in Algeria next month will act to prop up prices.

The shutdown of production in the Gulf is a precautionary measure. It is expected to shut down production of about 168,334 barrels per day of oil.

In economic news, according to the Conference Board, U.S. consumer confidence reached its highest level in nearly a year in August. The consumer confidence index for August rose to 101.1, soundly beating the 97 estimate.

The S&P CoreLogic Case-Shiller 20-City Composite Index, rose 5.1 percent year over year, versus an estimate of 5.2 percent.

September U.S. Dollar Index futures spiked higher on the consumer confidence news this bodes well for the Fed to raise rates.

Oil prices turned negative on the news, but there was little reaction in most markets. The S&P 500 Index fell 0.3 percent, driven by lower utility stocks. The Dow Jones Industrial Average slipped about 60 points. The NASDAQ Composite was down about 0.27 percent.U.S. Dollar Spikes Higher on Strong Consumer Confidence