Michigan consumer survey to highlight inflation expectations

The University of Michigan consumer sentiment survey is due at 1400 GMT. The headline estimate will provide some perspective on US consumer sentiment, but the inflation expectations component is expected to be the key figure.

One-year inflation expectations rose to 4.6% in September from 4.0% a month earlier. The five-year view also increased, to 3.4% from 3.3%.

What should traders focus on this time?

Given the recent surge in oil prices, the main point to observe is whether short-term inflation expectations keep climbing. At the same time, the long-term reading is also important, as a further rise could heighten concerns that inflation expectations are becoming more entrenched.

How does this relate to broader market movements?

Stronger data could increase unease in the bond market, likely keeping Treasury yields elevated and offering some support for the dollar. This is particularly notable after the yield decline on Wednesday, as a stronger reading could reignite the selling pressure seen earlier this week.

However, one consumer survey should not be overinterpreted. Household inflation expectations and actual inflation outcomes are not the same.

With markets already contending with higher yields and resurgent inflation concerns, the more significant test is next week's US CPI report. The survey today may provide some insight into consumer sentiment, but the CPI data will give traders a clearer view of actual price pressures.