– Consumer Sentiment IndexUniversity of Michigan’s Consumer Sentiment Index (CSI)Looking at Friday’s North American session, the Pound Sterling (GBP) was in a downward trend against the US Dollar (USD), breaking below 1.3330. The GBP/USD pair had previously seen gains during the day but later turned negative as the US Dollar (USD) made a comeback from its losses after the release of the preliminary US Michigan Consumer Sentiment Index (CSI) and Consumer Inflation Expectations for May. The US Dollar Index (DXY), which measures the USD’s strength against six major currencies, rose to around 100.90.
The Flash CSI, which was released unexpectedly, dipped to 50.8 from 52.2 in April, reaching its lowest level since June 2022. This was contrary to economists’ expectations of a rise to 53.4 and marks the fifth consecutive decline in sentiment data. Meanwhile, one-year forward Consumer Inflation Expectations also showed an increase from the previous release of 6.5% to 7.3%. This could prompt the Federal Reserve (Fed) to maintain the current interest rates as they continue to monitor the impact of new economic policies proposed by US President Donald Trump.
Fed officials have been advocating for keeping borrowing rates in the current range of 4.25%-4.50% until there is more clarity on how Trump’s policies may affect the economy. Despite the recent agreement between the US and China to pause the tariff war and reduce existing tariffs, Fed officials still believe that the current level of tariffs could lead to inflation. According to the CME FedWatch tool, the probability for the Fed to maintain rates at 4.25%-4.50% in the June and July meetings is at 91.8% and 61.4%, respectively.
Earlier in the day, the US Dollar underperformed due to weaker-than-expected Producer Price Index (PPI) data for April. This data showed that producer prices unexpectedly fell from the previous month due to a significant slowdown in the hospitality sector. Soft Retail Sales data also contributed to the decline of the US Dollar. Retail Sales, an essential measure of consumer spending, rose by only 0.1%, a significant decrease from the 1.5% seen in March. This was likely due to households stockpiling goods in March in anticipation of potential tariff changes by President Trump. Auto sales also fell by 0.1% compared to a 5.5% increase in March, while durable items saw a moderate growth of 0.3%, a significant decrease from the 1.5% increase in the previous month.
The Pound Sterling continues to face downward pressure above 1.3300 against the US Dollar on Friday. However, the GBP/USD pair is still trading above the 20-day Exponential Moving Average (EMA) which is around 1.3256, indicating a bullish trend in the short term. The 14-day Relative Strength Index (RSI) is currently oscillating between 40.00-60.00, and a break above 60.00 could signal a new bullish momentum.
On the upside, the three-year high of 1.3445 will serve as a key barrier for the pair. On the downside, the psychological level of 1.3000 will act as a major support level.