USD weakens as UMich sentiment drops to 55.4, inflation expectations rise

The US dollar faced selling pressure following the University of Michigan's preliminary September consumer sentiment index, which fell sharply to 55.4 from 58.2 previously, significantly below the 58.0 forecast. The disappointing sentiment data was compounded by rising inflation expectations, with the 5-year outlook jumping to 3.9% from 3.5%, potentially complicating the Federal Reserve's monetary policy decisions. Current conditions remained relatively stable at 61.2 versus 61.3 expected, while future expectations plummeted to 51.8 from 54.9 anticipated. The deteriorating consumer confidence suggests weakening economic momentum, which could influence the Fed's rate trajectory. Major dollar pairs showed immediate reactions, with EUR/USD and GBP/USD gaining ground as traders reassessed dollar positions ahead of next week's FOMC meeting. Technical indicators point to further dollar weakness if support levels fail to hold.