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- UOM Consumer Index came without expectation of the market in April.
- The US dollar index remains deep in the negative lands less than 100.00.
Consumer confidence in the United States continued to deteriorate in April, as the Consumer Morals Index at the University of Michigan (UOM) decreased to 50.8 in the flash estimation of 57 in March. This reading came in worse than expected the market of 54.5.
The basic details of the report showed that the current conditions index decreased to 56.5 out of 63.8 in the same period, while the consumer expectation index worsened to 47.2 out of 52.6.
A future component of inflation jumped for one year to 6.7 % of 5 %, and inflation for five years Expectations It rose to 4.4 % of 4.1 %.
UOM indicated that the share of consumers who expects unemployment to rise next year to the highest level since 2009.
Market reaction
the US dollar index It is still under heavy pressure after this report and the last time was seen 1.3 % per day at 99.62.
Common questions about inflation
Inflation measures an increase in the price of a representative basket for goods and services. The main inflation is usually expressed as a change in percentage on a month on a monthly (illiterate) basis on an annual (annual) basis. Basic inflation excludes more volatile elements such as food and fuel that can fluctuate due to geopolitical and seasonal factors. The basic inflation is the number that economists focus on and is the level targeted by central banks, which are assigned to maintaining inflation at a controlled level, and is usually about 2 %.
Consumer price index (CPI) measures changing commodity and services basket prices over a period of time. It is usually expressed as changing a percentage on a month basis on a monthly (illiterate) basis and on an annual basis (YOY). Core CPI is the number targeted by central banks as it excludes food and flying fuel inputs. When the basic consumer price index rises above 2 %, it usually leads to high interest rates and vice versa when less than 2 % is less than 2 %. Since high interest rates are positive for the currency, high inflation usually leads to a stronger currency. The opposite is true when the inflation falls.
Although it may seem intuitive, high inflation in a country pays the value of its currency and vice versa to reduce inflation. This is because the central bank usually raises interest rates to combat higher inflation, which attracts more global capital flows from investors looking for a profitable place to enter their money.
In the past, gold was the asset investors turned in times of high inflation because it maintained its value, and while investors will often buy gold for its safe properties in times of extremist turmoil in the market, this is not the case most of the time. This is because when inflation is high, central banks will put interest rates to combat them. The highest interest rates are negative for gold because it increases the costs of maintaining gold in assets that bear interest or placing money in the calculation of cash deposits. On the other hand, low inflation tends to be positive for gold because it leads to low interest rates, making the bright metal a more applicable investment alternative.
