The preliminary Michigan Consumer Sentiment Index for December is likely to rise to 52, up from November’s three-year low of 51. However, consumer confidence remains low due to a stagnant job market and high prices. November saw current economic conditions drop from 58.6 to 51.1. In contrast, economic expectations improved slightly to 51 from 50.3. The UoM Consumer Sentiment Index measures how US consumers feel about their finances, business conditions, and purchasing plans. It acts as a predictor of future economic trends.

Impact Of The Government Shutdown

This update comes after a lengthy US government shutdown. Experts hope consumer sentiment will show a slight uptick. Household spending, which makes up about two-thirds of the US GDP, highlights the index’s importance in predicting economic changes. Key issues affecting sentiment include persistent high prices and lower incomes, even as inflation seems to be stabilizing. Although the expected rise in sentiment may not help the struggling US Dollar, the index is still an important economic indicator. The US Dollar has been lagging due to cautious comments from the Federal Reserve and weak economic data, raising speculation about interest rate cuts. Analyst Guillermo Alcala remarked that the US Dollar Index has not managed to break through important resistance levels recently. Considering the data expected today, the slight forecast increase in consumer sentiment from 51 to 52 appears minimal. The broader issue is that confidence is still near historic lows, not seen since the inflation surge of 2022. This ongoing weakness reinforces our negative outlook on the US economy and the US Dollar.

A Falling Dollar Strategy

We recall that the job market showed clear signs of slowing throughout 2024, with job creation falling below 150,000 in the latter half of the year. This trend has persisted, and combined with inflation staying above 3.5%, it has strained consumers’ finances. This long-term decline in purchasing power is the main factor influencing current sentiment. The Federal Reserve is responding to this slowdown, and we expect them to cut interest rates later this month. This action creates a significant difference from other global central banks, which have mostly completed their easing cycles. This divergence is the main reason the dollar performed poorly last month compared to other G8 currencies, and we foresee this trend continuing. In the upcoming weeks, we should explore strategies that benefit from a falling dollar. Buying put options on the US Dollar Index (DXY) or USD futures offers a direct method to profit from further declines. Alternatively, going long on futures for currencies like the Euro or Swiss Franc against the dollar could yield strong returns as this policy gap widens. The DXY’s technical breakdown below the important 99.00 level last week was a significant bearish signal. We should now watch for a decline toward the 98.57 and 98.00 support levels. Any short-term strength in the dollar after today’s announcement should be seen as a selling opportunity, not a sign of a trend change. Create your live VT Markets account and start trading now.

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