The US dollar has pulled back slightly amidst increased risk appetite on news that the University of Michigan's consumer confidence index unexpectedly rose in March to 56.6 from 56.3. Looking at a breakdown of the index, sentiment on currenct economic conditions turned increasingly pessimistic, while the outlook actually improved very slightly. Meanwhile, inflation expectations for one-year ahead rose to 2.2 percent from 1.9 percent and expectations for five-years ahead slipped to 2.8 percent from 3.1 percent. Overall, the inflation expectations will be somewhat encouraging for the Federal Reserve as they suggest that the central bank has done a good job of signaling that medium and long-term price growth will remain around 2 percent, which is a common inflation target amongst many of the world's central banks.
University of Michigan Consumer Confidence Index (Monthly Chart)
Source: Bloomberg
