Consumer Sentiment, US Dollar – Talking Points

  • Univ. Of Michigan Sentiment Jul P: 51.1 (est.49.9; prev. 50.0)
  • Inflation and growth concerns continue to weigh on sentiment
  • US Dollar lower as markets battle over potential 100 bps rate hike

US Consumer Sentiment rose during June, as Americans remain worried about persistent inflationary pressures. 1-year forward inflation expectations fell from 5.3% to 5.2%, while 5-10 year expectations dropped to 2.8% from 3.1% in May. This solid report may cool bets on a 100 bps rate hike in July, as it was an upside surprise in 5-10 year inflation expectations back in May that caused the Fed to raise by 75 bps instead of 50. The upside surprise on sentiment bolstered risk assets, with both the Nasdaq 100 and S&P 500 gaining more than 1% premarket.

US Economic Calendar

US Consumer Sentiment Rises in June Despite Persistent Inflation, Growth Fears

Courtesy of the DailyFX Economic Calendar

With inflation expectations pulling back slightly, it appears that the Fed may have restored some credibility with the public when it comes to combating persistent price pressures. The decline in inflation expectations brought the odds of a 100 bps rate hike at the July FOMC meeting down to just 30% according to CME Group. Christopher Waller of the FOMC Board of Governors also walked some of those rate hike bets back in comments made yesterday, saying that the market had “likely gotten ahead of itself” with pricing in a 100 bps rate hike.

CME Fedwatch Probabilities

US Consumer Sentiment Rises in June Despite Persistent Inflation, Growth Fears

Courtesy of CME Group

The US Dollar remained under significant pressure following the release of consumer sentiment data, which came on the back of stronger-than-expected retail sales data. EURUSD, roughly 60% of the US Dollar Index (DXY), continues to put up a fight around parity. Despite pulling back on Friday by roughly 0.50%, the DXY may look to resume its trend higher if support around 108.18 holds. If the Euro gains traction on what is expected to be the ECB’s first rate hike in 11 years, the Greenback may look to prior resistance around 105.80. Given the landscape, any pullbacks in the USD may represent great opportunities to re-enter on the long side, as the Fed appears far from pivoting.

US Dollar 4 Hour Chart

US Consumer Sentiment Rises in June Despite Persistent Inflation, Growth Fears

Chart created with TradingView

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— Written by Brendan Fagan

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