US consumer sentiment improved, but inflation expectations rose

The Canadian Dollar (CAD) encountered headwinds like Fed’s official Christopher Waller saying that more tightening is needed amidst a solid labor market and stickier core inflation on the consumer and producer side. US Retail Sales disappointed analysts and plunged 1% MoM in March, compared to a 0.4% contraction. Annually-based data was 2.9%, below the prior’s month 5.9%.

At the same time, the Fed revealed that Industrial Production in March fell for the first time in 2023, expanding 0.4% MoM vs. estimates of 0.2%, and trailed February’s 0.9% data. Production output dropped due to a pullback in durable goods.

Lately, the University of Michigan (UoM) Consumer Sentiment poll showed an improvement in sentiment in April, up from 62 to 63.5, though inflation expectations for one year jumped 1% from 3.6% to 4.6%. That exacerbated a jump in US bond yields, with the 2-year recovering some ground, jumping 13 basis points, at 4.105%, and underpinning the US Dollar.

The US Dollar Index, a measure of the buck’s value against six currencies, is making a U-turn, up 0.48%, at 101.487.

Another Fed official, Chicago’s President Austan Golsbee, noted that he would focus on tighter credit conditions and lending data regarding his decision for the upcoming May 2-3 meeting. Golsbee added that although inflation is cooling, there is some “clear stickiness: in some price categories.

On the Canadian front, Statistics Canada revealed that manufacturing sales slid 3.6% in February, weighed by sales of petroleum and coal products. Expectations were for a 2.7% plunge, though the slippage in oil and coal products of 14.8% dragged the index lower.