James Knightley, Senior Economist at ING, suggests that despite market worries, the US household sector remains in decent shape. Key Quotes “Friday’s US consumer confidence reading as measured by the University of Michigan dipped to 90.7 in February versus 92.0 in January. This was a bit weaker than the 92.3 consensus, but isn’t too bad given the scale of equity market sell-off. Indeed, strong employment gains, rising real incomes and a firm housing market are providing enough offsetting effects for now and with retail sales having come in stronger than expected (when upward revisions are included) it looks a reasonably encouraging consumer spending story for now – January retail sales rose 0.2% MoM after a 0.2% growth rate in December versus the -0.1% originally reported. However, equity markets don’t seem particularly interested unfortunately and the longer that this goes on the greater the risk that it feeds negatively into the real economy through weaker sentiment and tighter financial conditions. This week’s data calendar, including the Federal Reserve minutes, industrial production and CPI won’t shake the market out of its current mind-set. In fact, CPI could make things worse should inflation pick up more aggressively than expected (consensus expects headline CPI to rise from 0.7% YoY to 1.3% and core to hold at 2.1%) given it could suggest that the Federal Reserve has less room to offer stimulus should the environment necessitate it.” For more information, read our latest forex news.