Lee Hardman, Currency Analyst at MUFG, suggests that global investor risk sentiment was undermined as well yesterday by the release of the weaker than expected US consumer confidence survey for February. Key Quotes “The survey revealed that consumer confidence dropped by a larger than expected 5.6 point to 92.2 in February moving back into line with its long-term average. The expectations sub-component declined to its lowest level since February 2014 pointing towards some moderation in consumer spending growth. Consumer confidence is being hit by the weakness early this year in the US equity market highlighting the risk that negative financial market developments could spill-over more materially into the real economy. The labour market differential also deteriorated modestly. Nevertheless, the survey has had limited negative impact on the US dollar. The release today of the services PMI survey for February will be watched closely as well for any further signal that domestic demand growth is softening. Fed Vice Chair Fischer has spoken overnight reiterating comments he made in a speech from the start of this month. He repeated that it is still too early to judge ramifications from the market turmoil and that they simply do not know yet what the Fed will do in March. He highlighted that a sustained tightening in financial conditions could affect the US economy and that lower oil prices suggests inflation will stay low for longer. We continue to expect the Fed will signal a more gradual tightening cycle in their updated projections at the March FOMC meeting. Downside risks for the US dollar are limited given the market is already discounting very limited Fed tightening.” For more information, read our latest forex news.