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Trading the News: U. of Michigan Confidence



A meaning rebound in the U. of Michigan Confidence survey may fuel the recent series of lower highs & lows in EUR/USD as it encourages the Federal Open Market Committee (FOMC) to further normalize monetary policy over the coming months.

Data prints highlighting an improved outlook for the U.S. economy may push the FOMC to deliver a March rate-hike as ‘many participants judged that the proposed changes in business taxes, if enacted, would likely provide a modest boost to capital spending.’ In turn, the Fed may utilize the January 31 interest rate decision to prepare U.S. and households for higher borrowing-costs, with the dollar at risk of exhibiting a more bullish behavior as the central bank appears to be on course to deliver three rate-hikes in 2018.

The U. of Michigan Confidence survey unexpectedly weakened in December, with the index narrowing to 96.8 from 98.5 the month prior. At the same time, the gauge for future expectations slipped to 84.6 from 88.9, while 12-month inflation expectations climbed to an annualized 2.8% from 2.5% in November.

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