The dollar index (DXY00) on Friday rose by +0.63% and posted a 1-1/2 week high. An increase in long-term U.S. inflation expectations boosted T-note yields Friday and strengthened the dollar’s interest rate differentials. Also, comments from Fed Governor Bowman were hawkish for Fed policy and bullish for the dollar when she said she expects interest rates to remain restrictive for some time. A larger-than-expected decline in the University of Michigan U.S. May consumer sentiment was bearish for the dollar.
Friday’s U.S. economic news was mixed for the dollar. On the bullish side, a deterioration of inflation expectations was hawkish for Fed policy and bullish for the dollar after the University of Michigan U.S. May 5-10 year inflation expectations unexpectedly rose +0.2 to a 12-year high of +3.2% versus expectations of a decline to +2.9%. Conversely, the University of Michigan U.S. May consumer sentiment index fell -5.8 to a 6-month low of 57.7, weaker than expectations of 63.0.
