- Consumer confidence has been at or near record highs for months despite trade wars and other uncertainties
- Current conditions disappointed the expected 114.9 figure with a 113.2 print
- Dollar movement was tempered as the decision met market expectations
The University of Michigan’s sentiment report for November crossed the wires Friday morning and outperformed expectations. The headline figure read 98.3, higher than the forecasted 98 but slightly below October’s 98.6. Future expectations also impressed, 88.7 versus the forecasted 87.2 and last month’s 89.3. One-year inflation expectations dipped slightly to 2.8% from 2.9% while consumers saw inflation at 2.6% over the next five to ten years, up from 2.4% in October’s report.
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A weaker area of the report this month was consumer’s view on the current conditions of the economy. While it outperformed last month’s 113.1, the November figure fell short of the expected 114.9 reading at 113.2. The survey’s curator, Richard Curtin, commented on Friday’s data saying “The stability of consumer sentiment at high levels acts to mask some important underlying shifts. Income expectations have improved and consumers anticipate continued robust growth in employment, but consumers also anticipate rising inflation and higher interest rates.”
A portion of the underlying shifts referred to by Mr. Curtin, namely rising interest rates, were highlighted yesterday as the Fed decided not to hike the Fed Funds range. The decision confirmed that the Fed will likely hike at the next meeting which will be accompanied by a press conference and quarterly report. Still, fears of rising rates could be tempered should the Fed shift their tone on rate hikes for 2019. Currently markets are uncertain if the central bank will pursue three or four hikes in the next year.
US Dollar Basket (DXY) Price Chart 5-Minute, November 9th
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The Dollar basket had virtually no reaction to the data release, given it is a leading indicator and fell comfortably within range. Next week, the Dollar will look to an array of data as it looks to hold above 96 and rest on trend-line support.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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