- Consumer confidence rose sharply in June, according to the Michigan Consumer Sentiment Index.
- One-year inflation expectations eased to 5.1%.
American consumer confidence regained its smile in early June, as households grew more optimistic about current conditions and the broader economic outlook, according to preliminary data from the University of Michigan.
The closely watched consumer sentiment index rose to 60.5 from 52.2 in May, surpassing economists’ expectations and signalling a better backdrop for public confidence.
Furthermore, the Current Conditions index climbed to 63.7 from 58.9, while the Expectations gauge rose to 58.4 from 47.9, highlighting some change of view regarding the months ahead.
Inflation expectations, meanwhile, ticked lower. The one-year outlook eased to 5.1% from 6.6%, and the five-year forecast receded to 4.1% from 4.2%, suggesting that consumers are seeing some loss of momentum in price pressures, in line with recent signs of easing inflation in official data.
Market reaction
The US Dollar remains well bid, albeit off early highs, making a strong reversal on Friday and challenging the area of two-day highs on the back of the return of the risk-off sentiment to the global markets. The US Dollar Index (DXY) manages to bounce off recent multi-year lows, revisiting the 98.60 zone.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.50% | 0.46% | 0.45% | 0.09% | 0.69% | 0.80% | 0.31% | |
| EUR | -0.50% | 0.00% | 0.02% | -0.35% | 0.28% | 0.31% | -0.20% | |
| GBP | -0.46% | -0.00% | -0.06% | -0.43% | 0.19% | 0.25% | -0.18% | |
| JPY | -0.45% | -0.02% | 0.06% | -0.34% | 0.25% | 0.34% | -0.13% | |
| CAD | -0.09% | 0.35% | 0.43% | 0.34% | 0.59% | 0.73% | 0.25% | |
| AUD | -0.69% | -0.28% | -0.19% | -0.25% | -0.59% | 0.07% | -0.37% | |
| NZD | -0.80% | -0.31% | -0.25% | -0.34% | -0.73% | -0.07% | -0.45% | |
| CHF | -0.31% | 0.20% | 0.18% | 0.13% | -0.25% | 0.37% | 0.45% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the preliminary UoM Consumer Sentiment index for the month of June at 11:00 GMT.
- Consumer Sentiment in the US is expected to remain subdued, according to the University of Michigan survey.
- The main focus will be on whether five-year inflation expectations continue to fall after declining in May for the first time since December 2024.
- The US Dollar Index may extend its slide to fresh multi-year lows.
The United States (US) will see the release of the preliminary estimate of the June University of Michigan’s (UoM) Consumer Sentiment Index on Friday. The report is a monthly survey conducted by the University that gathers information on consumer expectations for the economy. Two weeks after the release of the flash reading, the UoM publishes a final estimate.
The report includes different sub-readings, which have lately impacted financial markets. On the one hand, it offers a Current Conditions Index and a Consumer Expectations Index. On the other hand, and more critical to financial markets, it offers one-year and five-year inflation expectations.
Consumer Sentiment, according to the UoM, stood at 52.2 in May, unchanged from April, after falling for four consecutive months. The Current Conditions Index fell to 58.9 from 59.8 in the same period, while the Consumers Expectations Index ticked modestly higher to 47.9 from 47.3.
Inflation expectations in focus after tariff woes
More relevant, the one-year inflation outlook component of the survey increased to 6.6% from 6.5%, while the five-year inflation outlook eased to 4.2% from the 4.4% posted in April.
The official report states: “This is the smallest increase since the election and marks the end of a four-month streak of extremely large jumps in short-run expectations,” referring to the one-year inflation outlook, adding that the fall in the longer-term price outlook was the first since December 2024.
“Given that consumers generally expect tariffs to pass through to consumer prices, it is no surprise that trade policy has influenced consumers’ views of the economy. In contrast, despite the many headlines about the tax and spending bill that is moving through Congress, the bill does not appear to be salient to consumers at this time,” the report added.
The figures could have a significant impact on financial markets, particularly after the release on Wednesday of the May Consumer Price Index (CPI) figures. Inflation, as measured by the change in the CPI, rose to 2.4% on a yearly basis in May from 2.3% in April, below the 2.5% expected, according to the US Bureau of Labor Statistics (BLS).
Additional signs of easing inflationary pressures could revive confidence in the US economic performance and alleviate concerns related to tariffs.
How can the UoM report affect the US Dollar?
The US Dollar Index (DXY) plunged on Thursday to multi-year lows in the 98.70 region amid fresh trade and geopolitical tensions.
Despite easing US-China trade tensions, US President Donald Trump made some worrisome comments on Wednesday, stating that he was willing to extend the July 8 deadline for completing trade talks, but also added that he is ready to impose unilateral tariffs within two weeks.
The market sentiment also soured on renewed Middle East tensions. News indicate that Israel is preparing an operation against Iran, with the US expecting retaliatory measures. The headline came after US-Iran nuclear talks appeared to have halted.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The DXY is extremely oversold, according to technical readings in the daily chart, but there are no signs of downward exhaustion. Given that the slump is sentiment-driven, additional slides can not be ruled out. Speculative interest will look for reasons to keep selling the Greenback, although the DXY may recover ahead of the weekly close amid profit-taking.”
Bednarik adds: “The DXY bottomed around the 97.70 on a weekly basis in March 2022, the immediate support area. Once below it, the index could extend its slide towards the 97.00 mark. Conversely, a recovery would see the index testing the 98.00 threshold, ahead of 98.35, where the DXY bottomed on June 5.”
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
