Summary:

  • US consumer confidence increases to the highest level since 2004 easily exceeding market expectations
  • 1-year inflation expectations pick up the most since March 2015 just ahead of the Fed meeting
  • USDCAD seems to be set for a major breakout looking at a weekly time frame

Following rosy industrial output US consumer confidence climbed the highest point since 2004 boosted by tax cuts which increased disposable income. At the same time inflation expectations for one year ahead jumped to the best level since March 2015 being steered by freshly imposed tariffs helping the US dollar at the end of the trading week.

link do file download link1-year inflation expectations increased to the highest level since the first quarter of 2015 on the back of new tariffs. Source: Macrobond, XTB Research

According to the University of Michigan survey consumer confidence in March jumped from 99.7 to 102 beating the consensus at 99.3. Simultaneously, expectations about the future economic conditions declined from 90 to 88.6 while the current conditions improved from 114.9 to 122.8. Notice that better confidence among citizens could help underpin consumer spending and thereby heal the whole first quarter in terms of consumption (it does not look well following the retail sales data for two months of 2018). Last but not least, inflation expectations for one year ahead jumped from 2.7% to 2.9% reaching the highest point since March 2015 being predominantly driven by newly imposed tariffs, which at the same time dimmed the consumers’ future outlook. By and large, the report seems to underpin odds for the fourth rate hike this year while the next week move appears to be already a done deal.

The US dollar is obviously benefiting from the set of the better macroeconomic releases, and the largest gains might be seen against commodity-related currencies such as the Canadian dollar. Technically, the USDCAD is likely to make a major breakout looking at a weekly time frame, and if it actually happens, it could lead to a move toward 1.33, the key resistance supported by a 50% retracement of the entire decline since the beginning of 2016.

link do file download linkThe USCAD looks to be set for a major breakout from a weekly time frame point of view. If so, upward momentum could push the price toward 1.33 where a notable resistance is placed. Source: xStation5