Summary:

• University of Michigan consumer sentiment falls to 96.8
• Inflation expectations pick up to 2.8%
• Gold set to end the week near its lows after big breakout

The final economic release of the week from the US has seen the University of Michigan consumer sentiment index fall lower, but any disappointment for USD bulls has been negated somewhat by a rise in inflation expectations. 

A reading of 96.8 for December is below both the consensus forecast (99.0) and the prior reading of 98.5 (revised higher from 97.8). This fall in consumer confidence may appear worrying on the face of it, but put in a longer term context the latest reading remains high in historical terms. 

 Despite the latest drop in the UOM reading, it remains high by historical standards. Source: XTB Macrobond

As well as the consumer sentiment index, the survey also asks respondents on there outlook for inflation and this can have an impact on how the market takes the data. The latest release showed a rise in inflation expectations to

2.8% from 2.5% previously (revised down from 2.6%) which is in fact the highest print since the February release. 

 There has been a fairly sharp increase in the 1 year inflation expectations, which have been in a steady downtrend in recent years. Source: XTB Macrobond

Gold rose earlier following the NFP release but the market has moved off its highest levels of the day. Should the market end the week around current levels or lower it would provide further confirmation of the break lower seen yesterday. The market dropped to a 4-month low after breaching 1260 on Thursday morning and the price has continued lower today. 

 Gold looks set to end the week with a sizable decline and there could be more downside ahead. Source: xStation