Consumer Sentiment Exceeds Expectations, Boosts U.S. Dollar

Key Insights

• Consumer Sentiment increased from 56.8 in November to 59.1 in December. 
• The report provided material support to the U.S. dollar. 
• Stock traders’ reaction to Consumer Sentiment data was muted. 

Consumer Mood Improved In December

The preliminary release of the Michigan Consumer Sentiment report indicated that Consumer Sentiment improved from 56.8 in November to 59.1 in December, compared to analyst consensus of 56.9.

Consumer Sentiment declined below the 60 level in May and reached a bottom at 50 in June. In recent months, Consumer Sentiment has mostly fluctuated in the 58 – 60 range, although it dropped to 56.8 in November.

It is too early to say that Consumer Sentiment is ready to move higher, although it looks that consumer mood has stabilized ahead of the next year.

The improvement in Consumer Sentiment is bullish for the U.S. dollar, as it boosts chances for an aggressive Fed.

U.S. Dollar Gains Ground After The Release Of Michigan Consumer Sentiment Report

U.S. Dollar Index continued to rebound and moved towards the 105 level after the release of Consumer Sentiment data. Not surprisingly, Treasury yields are also moving higher. Traders bet that the Fed may be more hawkish at the next meeting.

This view is supported by today’s PPI data. PPI declined from 8.1% in October to 7.4% in November, compared to analyst consensus of 7.2%. Core PPI pulled back from 6.7% to 6.2%, while analysts expected that it would decline to 5.9%. While the pace of producer prices growth is slowing down, inflation remains a serious problem.

Interestingly, Consumer Sentiment report did not put significant pressure on S&P 500. Currently, S&P 500 continues its attempts to settle above the resistance at 3960. It should be noted that stocks may find themselves under more pressure later in the session if the U.S. dollar continues to move higher.

For a look at all of today’s economic events, check out our economic calendar.