USD supported as UMich sentiment slumps to 47.8 and inflation expectations jump

The University of Michigan's preliminary September consumer sentiment index collapsed to 47.8 from 51.0 prior, badly missing the 51.0 consensus. The internals were equally weak, with current conditions at 50.9 versus 51.3 expected and the expectations component plunging to 45.8 against a 50.5 forecast. Crucially for FX, inflation expectations moved sharply the wrong way: one-year expectations surged to 4.6% from a forecast 4.0%, while the five-year measure ticked up to 3.4% versus 3.3% expected. The combination of deteriorating sentiment and de-anchoring inflation expectations strengthens the case for the Federal Reserve to tighten at next week's meeting, with market-implied odds of a hike now around 82%. That repricing is dollar-supportive across the majors, pressuring EUR/USD and GBP/USD while lifting USD/JPY on widening yield differentials. Traders should expect the dollar to hold a firm bias into the FOMC, though the weak growth signal in the headline reading leaves scope for a sharp reversal if the Fed's guidance sounds more cautious than pricing implies.