Meanwhile, consumer confidence has deteriorated sharply. The University of Michigan’s Consumer Sentiment Index dropped to 57.9 in March—its lowest level since November 2022—down from 64.7 in February and below the expected 63.1.
Rising inflation concerns also persist, with the five-year Consumer Inflation Expectation jumping to 3.9% from 3.5%, suggesting households anticipate prolonged price pressures.
These weaker retail sales and declining sentiment indicate a slowdown in economic momentum, adding pressure on the U.S. dollar. However, heightened inflation expectations could complicate Federal Reserve policy decisions, potentially delaying rate cuts and limiting the dollar’s downside.
Political Uncertainty and Geopolitical Risks Impact the Dollar
Beyond economic data, political uncertainty is another drag on the U.S. dollar. Reports indicate that former President Donald Trump is planning talks with Russian President Vladimir Putin regarding a potential Ukraine resolution, which could include territorial concessions and control over the Zaporizhzhia nuclear plant.
Additionally, speculation about a shift in U.S. foreign policy under a future Trump administration has created further uncertainty in global markets.
With economic and geopolitical risks mounting, traders are closely watching upcoming Federal Reserve commentary and global developments for further direction on the U.S. dollar’s outlook.
