Original article by James Hyerczyk, FX Empire
Link: [U.S. Dollar Rebounds from Session Lows as Michigan Consumer Sentiment Beats Estimates – Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY](https://www.fxempire.com/forecasts/article/u-s-dollar-rebounds-from-session-lows-as-michigan-consumer-sentiment-beats-estimates-analysis-for-eur-usd-gbp-usd-usd-cad-usd-jpy-1534654)
U.S. Dollar Strengthens After Economic Sentiment Data Beats Forecasts
On Friday, the U.S. dollar reversed earlier losses and gained ground, following positive data from the University of Michigan consumer sentiment survey. The preliminary reading for May surpassed expectations, highlighting growing optimism in the U.S. economic outlook. Investors reassessed the likelihood of the Federal Reserve maintaining higher interest rates for an extended period, contributing to the dollar’s late rebound.
The University of Michigan reported a consumer sentiment index score of 67.4 compared to analysts’ predictions of 65.0. This marked an uptick from April’s final reading of 65.8 and set the tone for a stronger dollar during the session. The dollar had initially come under pressure due to pre-market selling, but the improved consumer outlook helped curb the losses.
Key Takeaways from the May 10 Trading Session:
– The U.S. Dollar Index rose 0.11% to close at 105.31 after dipping earlier in the session.
– The Michigan Consumer Sentiment Index came in at 67.4, beating both April’s final reading and the consensus forecast of 65.0.
– This reading suggested consumer confidence remains intact, prompting traders to reduce expectations of Fed rate cuts in the near term.
Market Reaction to Consumer Sentiment Data
The unexpected improvement in consumer sentiment was interpreted as a sign of resilience in the U.S. economy. As a result, Treasury yields climbed, supporting the dollar’s recovery. With more confidence in the economy, the Federal Reserve may find less urgency to cut interest rates. This shift in sentiment reduced pressure on the greenback, which had been slowing amid concerns of weaker economic growth.
Market participants grew more cautious about betting against the dollar, particularly against its G10 peers, reversing earlier trends in the session. U.S. Treasury bond yields rose modestly, reflecting rising expectations that the Fed will keep rates higher for longer. Equities, while less directly impacted, ended the week mixed.
Currency Pair Analysis
EUR/USD – Euro Depressed by Firm U.S. Data and Central Bank Divergence
– The euro fell against the dollar after initially gaining in the European session. The EUR/USD pair closed lower, dropping to around 1.0770 by the end of the U.S. trading day.
– A stronger-than-expected U.S. consumer sentiment report helped lift the dollar, while dovish expectations around the European Central Bank’s (ECB) path kept the euro under pressure.
– The ECB has hinted at a possible rate cut in June as inflation continues to moderate across the euro zone.
– In contrast, U.S. inflation data remains sticky, underscoring the division in outlook between the Federal Reserve and ECB.
Technical Overview:
– EUR/USD slipped below its 200-day Moving Average, a bearish technical indicator.
– Immediate support lies at 1.0720, with further downside potential if support fails to hold.
– Resistance remains at 1.0820, which would need to be breached for bulls to regain control.
GBP/USD – British Pound Falters Amid Growing U.S. Optimism
– The British pound also declined against the U.S. dollar on Friday, sliding below the 1.25 level to settle near 1.2515.
– Market sentiment favors the dollar as optimism about the U.S. economy remains pronounced.
– The Bank of England (BoE), while less dovish than the ECB, has given mixed signals regarding
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