Consumer Sentiment and US Dollar Talking Points:
- Consumer Sentiment printed below expectations at 86.5 vs. forecast of 89.6.
- One year inflation expectations rose to highest level since 2012.
- US Dollar and US 10yr yields both rotated lower in the immediate aftermath of the print.
Consumer Sentiment Hits New Pandemic High in April But Misses Expectations
The University of Michigan’s preliminary consumer sentiment index for March printed at 86.5 vs. a forecast of 89.6, a disappointing result amidst consistent beats of expectations from other US economic data points in recent weeks. This print still marks the index’s highest point since last March, before the pandemic and related containment measures took effect.
The components of the University of Michigan report reflecta mostly positive outlook for the economy, weighed down by concerns with vaccine safety and rising inflation expectations. One Year Inflation Expectations rose to 3.7% from 3.1% in March, reaching a nine year high. The conditions component rose to 97.2 vs. expectations of 96.0, while expectations remained unchanged at 79.7. Longer term inflation expectations fell to 2.7% from last month’s readout of 2.8%.
DAILYFX ECONOMIC CALENDAR (April 16th, 2021)
Friday’s prints are another example of the rising optimism surrounding the economic reopening. Boosted by the arrival of stimulus checks and other supportive measures from the Biden administration’s stimulus bill, retail sales in March printed at 9.8%, their highest level since May of last year. Initial jobless claims also fell to their lowest level since the start of the pandemic. The CPI for March printed above expectations as base effects from last year’s lows come into the equation, but inflation metrics remain far from the runaway inflation that some have predicted. As vaccination efforts continue, the US economy looks on track to return to some level of normalcy in the summer.
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After rallying to a nearly five month high in March, the US Dollar has weakened again in April. The DXY peaked at 93.40 before slipping back downwards as the rise in Treasury yields stalled. The DXY has continued lower despite strong retail sales and jobless claims numbers earlier in the week, motivated by a similar drop in longer-term US yields. Ahead of the consumer sentiment print, the index was trading around the 91.60 level, at a one month low. 10yr yields were trading below the 1.60% level for the first time since mid March.
US Dollar Index (DXY) & US 10YR Treasury Yields – 1 Minute Time Frame
Chart created by Izaac Brook, Source: TradingView
In the immediate aftermath of the print, both the DXY and 10yr Treasury yields dropped lower. The DXY fell to a fresh intraday low below the 91.50 level, hitting a new one month low.
— written by Izaac Brook, DailyFX Research Intern