US Dollar, Consumer Confidence, Coronavirus, recession – Talking Points
- US Dollar bid slightly higher on Michigan consumer sentiment beat
- Expectations for an economic recovery remain dim
- US Dollar ticked slightly higher but remains lower following grim retail sales data
The University of Michigan’s preliminary consumer sentiment report for May crossed the wires Friday morning at 73.7, beating expectations of 68.0. While the headline figure beat expectations, it remains sharply lower from pre-pandemic levels. The downbeat report adds to earlier troubling news for the economy as retail spending for April released earlier Friday showed a record drop of 16.4 percent. US Dollar price action ticked slightly higher on the report, but remains lower from overnight highs.
US Dollar Basket (1-Min Chart)
Source: IG Charts
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While this morning’s retail sales and consumer sentiment data paints a picture for a full-blown economic contraction, other major events seem to be brewing as well, including a potential renewal of the US-China trade war. Viewing the broad macro landscape from the top down, it seems almost certain that the US is entering a recession. The Michigan sentiment report reflects those recession worries, with the expectations component of the index dropping to 67.7, down from 70.1.
University of Michigan Consumer Sentiment
States are already moving forward with reopening plans, which may provide a near-term bounce in economic activity. However, expectations for a recovery remain highly uncertain, and economic forecasts continue to degrade. The Atlanta Fed GDPNow forecast for second quarter economy growth currently stands at -34.9%.