USD flows: USD edges up on slighty better UoM survey
UoM confidence a little stronger than expected in December, but still at very low levels
The headline University of Michigan sentiment index was up slightly on the month, due to gains in the expectations index, and both 1 year and 5 year inflation expectations fell, all of which is being seen as USD positive. However, the current conditions index dropped to a new all time low and this must be of some concern. While the correlation between the UMich index and consumer spending has broken down somewhat since the pandemic, it was historically very strong, and despite the small rise in sentiment in the December data, remains at extremely low levels, with the current conditions index at record lows. We are not inclined to see this as an indication of impending recession, as other confidence indicators are much less weak, but the modest rise this month doesn’t provide much reason for a USD positive reaction given the extremely low levels.
