U.S. January Consumer Credit Exceeds Estimates; NZD/USD Falls

By Trang Nguyen,

THE TAKEAWAY: U.S. Consumer Credit Rose More Than Forecast in January > Surge in Non-revolving Credit Far more Offset Decline in Revolving Credit > NZD/USD Falls

U.S. consumer debt sharply rose in January, a positive sign of economic growth and recovery in the U.S. as demand on car and student loans increased. The Federal Reserve reported today that the total of all consumer credit outstanding grew $17.776 billion, or 8.6 percent at annual rate, in January following a revised $16.268 gain in December and a $20.375 billion peak in November. The print is well above consensus forecast as thirty-eight economists surveyed by Bloomberg News had predicted a modest rise of $10.450 billion. Projections were fairly divergent, ranging from a fall of $5 billion to a gain of $20 billion.

U.S. Consumer Credit: June 2010 to Present

Prepared by Trang Nguyen

Consumer credit climbed more than forecast in January as surge in non-revolving credit far more offset decline in revolving credit. Non-revolving credit, including student loans, car loans and loans for mobile homes, advanced 14.7 percent at annual rate to $1711.4 billion in January, the biggest monthly increase since November 2011. Improving labor market condition coupled with increasing pay rate boosted demand on autos. Auto sector posted another strong month for car sales in January, with 14.1 million annual rate cars sold. Besides, demand on student loans picked up as more students are of college-going aged and more unemployed Americans headed back to school but do not have cash on hand to pay for school, given slow economic recovery and rising tuition cost. In contrast, revolving credit, which mostly measures credit card use, retreated 4.4 percent to $800.9 billion. This is also the first decrease in spending on credit cards since August.

NZD/USD 1-minute Chart: March 7, 2012

Charts created using Strategy Trader – Prepared by Trang Nguyen

The greenback continued to trade under pressure versus most of its major currencies but pared loss against the New Zealand dollar since the announcement of Reserve Bank of New Zealand’s interest rate decision released at the same time with the U.S. consumer credit report (3:00 P.M. EST) significantly move the market. Explaining for holding Official Cash Rate steady at 2.5 percent, the Reserve Bank Governor Allan Bollard expressed his concern over the “above fair value” currency that weigh on tradable sector, tourism and economic growth. Inevitably, strong New Zealand currency coupled with slowing global recover will keep interest rate lower for longer. As can be seen from the 1-minute chart above, the NZDUSD pair slipped approximately 50 pips from 0.8200 to 0.8150. The Relative Strength Indicator crossing below the 30-level indicated that currency traders was massive selling the kiwi, the nickname of New Zealand currency, in favor of the greenback. At the time this report was written, the kiwi trims gain by 0.47 percent versus the reserve currency, trades at $0.81614.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/03/07/030712_Consumer_Credit_January.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.