Market Wrap – Michigan Survey Mixed

The University of Michigan Consumer Sentiment survey rose to 55.1 against market expectations of 52.5. The survey was the first preliminary reading for the month of August and set the tone for the rest of the US session and the European weekly close.

Breaking down the numbers inside the report, aside from the rise in sentiment, some of the indicators inside the report were worse than expected. This is probably why we have seen a mixed reaction prior to the release.

The Conditions part of the survey came in at 55.5 vs. an estimate of 59.0 and 58.1 last month, while Expectations rose to 54.9 against an initial estimate of 48.4 and 47.3 last month.

One-year inflation expectation slightly dip to 5.0% vs. last month 5.2%. While 5-year inflation expectations rose to 3.0% against market expectations of 2.9%. This was the highest inflation expectation reading since 2011.

Traders often pay attention to today’s survey, and it is probably best to try and explain why this may be. The Index of Consumer Expectations focuses on three areas: how consumers view prospects for their own financial situation, how they view prospects for the general economy over the near term, and their view of prospects for the economy over the long term.

Each monthly survey contains approximately 50 core questions, each of which tracks a different aspect of consumer attitudes and expectations. The samples for the Surveys of Consumers are statistically designed to be representative of all American households, excluding those in Alaska and Hawaii.

Interestingly each month, a minimum of 500 interviews are conducted by telephone. This is one of the reasons why the survey is such a market mover because it is very credible and broad based.

In terms of the market reaction the US dollar has fallen, while the Nasdaq has surged to a new multi-week trading high. The recovery in the US dollar index picked up steam after the EURUSD broken the 1.0290 level.

The fact that the greenback is rapidly gaining strength is a big endorsement for the fact that the US dollar is not ready to fall just yet. This is also evident with the USD gaining against all major currencies.

Gold is starting to gain intraday, which is very curious given the turnaround in the buck. Oil prices are falling intraday, and this is one of the reasons why we are seeing a resumption of higher stock prices.