Euro fixing slips on French confidence slump: consumer confidence explained

The euro was the weakest major in today's ECB reference rates. The EUR/USD fixing for 27 October fell 0.34% to 1.1150, from 1.1188 on 26 October, on a day when French household confidence dropped to its lowest level since 2013.

investingLive reports that the French index came in at 80 in October, against 85 expected, as worries about public finances weighed on households. Investing.com described the dollar as firm while the euro "trips on French worries". Markets are also waiting for the Federal Reserve: investingLive's European wrap says markets remain rangebound ahead of the decision. The euro has now slipped in each of the last five fixings, from 1.1234 on 21 October. You can follow the pair on a EUR/USD chart.

What is consumer confidence?

A consumer confidence survey asks ordinary households how they feel about the economy. Typical questions cover their own finances, jobs, and whether now is a good time to make big purchases. The answers are turned into one number, called an index.

The idea is simple. Worried households tend to spend less and save more. Since household spending is a large part of most economies, a drop in confidence can hint at slower growth ahead. That can change how traders see a central bank's next steps, and so the currency.

Two things matter when you read the number:

• The level compared with its long-term average. investingLive notes the French index has a long-term average of 100.
• The surprise, meaning the gap between the actual result and the forecast economists expected.

A worked example

Start with France. The index fell to 80. The prior reading was revised to 85, and the forecast was 85.

• Change from last month: 80 − 85 = −5 points
• Miss versus forecast: 80 − 85 = 5 points below expectations
• Distance from the long-term average: 100 − 80 = 20 points below normal

Now the US. According to investingLive, the Conference Board index rose to 91.7, against 81.0 expected and a revised prior of 84.2.

• Beat versus forecast: 91.7 − 81.0 = +10.7 points
• Change from last month: 91.7 − 84.2 = +7.5 points

The US survey also splits into parts. The present situation index rose from 111.8 to 120.4 (+8.6 points). The expectations index rose from 65.7 to 72.6 (+6.9 points).

Finally, the currency. The EUR/USD fixing moved from 1.1188 to 1.1150:

• 1.1150 − 1.1188 = −0.0038
• −0.0038 ÷ 1.1188 × 100 ≈ −0.34%

One country missed and the other beat. That contrast is a common backdrop for a weaker euro against the dollar. Remember that an ECB fixing is one official rate per business day, not a live quote.

Why it matters for new traders

Consumer confidence is a "soft" data point. It measures feelings, not actual spending. investingLive itself questions the US reading, calling it mostly "a political barometer" that "doesn't tell us much about spending", and notes it is still at depressed levels after the worst reading since 2014. So one survey rarely sets a trend by itself.

The lesson is to read the level, the change and the surprise together, and to look for confirmation from "hard" data such as retail sales. For more context on the euro side, see this fxcash.com report on the euro and the French confidence slump.

Key terms

• Consumer confidence index: a survey-based score of how households feel about the economy.
• Soft data: surveys of opinion. Hard data: measured activity, such as sales or output.
• Surprise: the actual result minus the forecast.
• Revised prior: last month's figure after statisticians update it.
• Reference rate (fixing): the ECB's one official exchange rate per business day.