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US Dollar Lifts Higher on Solid Consumer Sentiment Report

USD Price Outlook & US Consumer Sentiment Index – Summary Points:

  • US Dollar strength continued to gain momentum from overnight trading on upbeat Consumer Sentiment revealed in the University of Michigan Survey of Consumers for January
  • Current personal finance conditions of consumers climbed for the period with income gains reported by 40% of households and underscores a healthy US economy
  • Inflation expectations ticked back up from December’s reading where expectations for price increases in the economy hit their lowest level since 2016 and could be boosting the USD

The University of Michigan released their preliminary report on consumer sentiment for January, giving the first glimpse of consumer expectations and conditions for the new decade. The report showed little change in the headline figure from December’s print with the latest reading dropping marginally to 99.1, which compares to the market’s consensus estimate of 99.3.

USD price action extended gains recorded earlier on in the day as Wall Street digested the overall solid Consumer Sentiment report. Shortly prior to the release of the UMich Consumer Sentiment Index, strong housing starts data is likely helping facilitate upward momentum in the US Dollar. That said, the Greenback could struggle to continue pushing higher with US Dollar outlook lacking impetus.

DXY Index (30-Min Chart)

Current conditions in the survey increased slightly to 115.8 from 115.5, supported by an upbeat attitude toward household incomes. Gains in income were reported by 40% of households in the survey and households saw a net increase of 17% to their wealth.

Giving insight into the Federal Reserve’s battle to lift inflation, expectations from consumers for short and long-term inflation ticked up in January after hitting a multi-year low last month. Specifically, both 1-Year and 5-10 year inflation expectations climbed to 2.5%, up from 2.3% and 2.5% respectively.

–Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater