- USD price action hammered across the board of major currency pairs this morning
- US Dollar selling pressure is accelerating in response to dismal consumer sentiment
- As EUR/USD rises and USD/JPY falls, the DXY Index has fallen by more than -0.3%
Friday's movement in the US Dollar was a positive sign. The USD has been trading on its side for the majority of the session. However, weakness is increasing as markets digest a major miss in the consumer sentiment report. The August preliminary consumer sentiment data showed a sharp fall in the headline index, as well as the current and future expectations subcomponents.
Consumer sentiment in general was 70.2. This compares with the market forecast and previous reading of 81.2. According to the survey, current conditions declined from 84.5 to 77.3 while future expectations plummeted from 79.0 and 65.2. According to the sentiment report, the seventh-largest month-over-month decrease in the headline index was due to a "stunning" loss confidence. This was primarily due to mounting concerns over the covid Delta variant.
The Fed's consumer sentiment report revealed that inflation expectations for 5-10 years rose to 3.0%, from 2.8% in July. The consumer sentiment report highlighted that consumers' reactions to delta's slightly higher precautionary measures indicate the difficulty in producing optimal policy responses. This likely complicates matters for the Federal Reserve as well as the debate about tapering asset purchases. That unsurprisingly has corresponded with more US Dollar weakness given the greater likelihood that FOMC officials drag their feet to delay the taper timeline.
