Michigan 48.1, inflation 4.6. Durables flat. DXY cooled.

Catalyst check. Friday September 25. Two scheduled US catalysts. First, Census Durable Goods Orders for August at 8:30 AM ET (source: Census advance release): new orders essentially flat month-on-month at 338.6 billion dollars, beating consensus of minus 0.4 percent. Two consecutive positive months prior. Second, University of Michigan Consumer Sentiment Final for September at 10:00 AM ET (source: University of Michigan Surveys of Consumers): headline index 48.1, up from the preliminary 47.8 print and above the 47.6 Reuters consensus, but the lowest reading in four months. Twelve-month inflation expectations climbed to 4.6 percent from August's 4.0 percent (steepest since June); the Expectations Index dropped 10.1 percent to 46.3 from 51.5; Current Economic Conditions edged down 1.9 percent to 50.9. Release times verified against the Census advance-report schedule and the Surveys of Consumers calendar.

Thursday's piece called the "confirmed" scenario as Michigan below 48, Durable Goods at zero or above, and DXY closing Friday above 101.20. The prints delivered a split. Michigan at 48.1 is inside the "below 52" range that confirms unmoored expectations; Durable Goods at zero MoM confirmed capex has not cracked. But DXY did not hold above 101.20. It closed at 100.97, down 32 pips on the day, the first pullback of the extension week. Gold rebounded 23 dollars to 4,321.20. The 10-year yield kept climbing to 5.184 (up 2.2bp). Rate differentials held; the currency did not. That specific pattern is the exact "yields up, growth concern up" split the framework flags as the first crack in a dollar-strength regime.

The tape

• DXY: 100.97, down 32 pips from Thursday's 101.29. First close below 101.00 in three sessions. Range 100.82 to 101.30. The pullback broke the four-day extension streak; the 101.00 pivot has now failed on the first retest.
• 10-year yield: 5.184 percent, up 2.2bp from Thursday's 5.162. Fresh 19-year daily-close high. The 2-year up 1.4bp to 4.722; the 30-year up 3.1bp to 5.260. Term-premium continues to expand; the divergence between yields (up) and DXY (down) is now the sharpest of the week and is the specific footprint that says the front-end is pricing more Fed persistence but the currency is starting to price growth downside.
• Gold: $4,321.20, up $23.20 from Thursday's $4,298.00. First up-day of the week. Range $4,289 to $4,343. The Michigan expectations-index collapse (down 10.1 percent to 46.3) is the specific catalyst; gold caught a growth-concern bid despite the real-yield extension.
• USD/JPY: consolidated near 158 after Thursday's 158.81 close. The DXY pullback pulled the pair back inside the Thursday range; the residual short-yen positioning from the September 18 BoJ decision has now fully cleared and the pair is trading on Fed-side moves only.
• EUR/USD: bounced back above 1.14 as DXY softened. GBP/USD: modest recovery from Thursday's 52-week low. Both currency pairs took a portion of the DXY pullback but underperformed on transatlantic PMI split (US 58.4 flash composite vs UK 47.8 flash manufacturing).
• Brent CFD spot: $104.32, down $2.28 from Thursday's $106.60. Range $103.10 to $106.50. The Ust-Luga premium partially unwound on OPEC+ signalling; the geopolitical bid remains but softened at the margin.

The Michigan print

48.1 is the lowest Michigan headline in four months and 15 percent below the January 2026 reading. The specific composition matters more than the headline. Expectations Index dropped 10.1 percent to 46.3 (the largest single-month drop of the year); Current Conditions edged down only 1.9 percent to 50.9. Consumers are still living in a soft-but-functional current-conditions regime, but their forward-looking assessment collapsed. The specific driver, per the release commentary, is "elevated prices" and "worsening business-condition outlook."

The specific piece of the release worth logging is the 12-month inflation expectation: 4.6 percent, up from August's 4.0 percent (source: University of Michigan Surveys of Consumers). That is the steepest single-month rise since June and puts the series 40 percent above the Fed's 2 percent target. Under the FOMC's SEP conditioning, inflation expectations remaining anchored was the specific input that supported the "hold at 4.10 through 2027" case; 4.6 percent 12-month is not anchored. See our reference on inflation-expectations surveys for the specific mechanics of how the Michigan versus New York Fed SCE readings feed into the Fed's own summary measure.

Political-partisan split noted in the release commentary: Republican sentiment down 20 percent from January; Democrats down 13 percent. Both parties recording material declines is the specific footprint of a broad-based sentiment shock rather than a partisan-narrative-driven one, which reads as more informative for the macro dashboard than the January-February partisan-mostly split.

The Durable Goods print

New orders flat month-on-month at 338.6 billion dollars is a beat versus the minus 0.4 percent consensus and follows two prior positive months (source: Census advance release). The specific read is capex is not softening at the rate the flash PMIs would have implied. Nondefense capital goods excluding aircraft (the specific "core capex" measure the FOMC watches for business-investment signal) is not in the advance release; it lands next week in the full report. Watch that number when it drops October 2.

The specific pairing worth logging: Michigan sentiment collapse (consumer-side pessimism intensifying) plus Durable Goods flat (business-investment pipeline holding) is the exact "consumer pulling back, business holding" split that has driven the 2026 dashboard since May. That is not new information; it is the same regime the framework has been tracking. The specific point is that Friday's prints reinforced the split rather than resolving it in either direction.

The read

Friday split the tape on a specific dimension worth logging. Rate differentials still favour the dollar: 10Y at 5.184, 2Y at 4.72, both up on the day. But the currency did not extend with the rates. That specific pattern (rates up, dollar flat-to-down) is the first crack in a dollar-strength regime, and it typically signals that the market has started to price growth-side downside risk that the rate-differential channel does not carry. Under the dollar smile framework, this is the specific setup where the right-side regime (dollar strength on relative growth) can shift toward the bottom of the smile (dollar strength on risk-off but growth deteriorating).

Two things worth logging. First, the Michigan expectations-index collapse is a specific consumer-side dashboard signal that has not been present in previous Warsh-era data. Consumer expectations were volatile through Q2 but not collapsing; the 10.1 percent single-month drop is the largest of the year. If it repeats in October's preliminary Michigan print (October 10), it becomes the specific consumer-side signal that would flip the FOMC's reaction function toward the growth-concern side.

Second, the 2-year yield up 1.4bp on a session when the DXY fell 32 pips is the specific decoupling that says the market is not pricing more hikes; it is pricing longer persistence at the current level. That fits the term-premium narrative the framework has been tracking since Wednesday. Friday's tape is a persistence-repricing extension, not a re-hike-pricing extension.

Working thesis updates. Additional-hike-within-2026 at 71 percent (down 5 percent on Friday's split tape). Hold-through-2027-with-no-cuts at 26 percent (up 4). Cuts-restart-inside-2027 at 3 percent (up 1). The distribution has partially retraced Wednesday's re-hike-side extension.

Setup update

Confirmed if: The August Core PCE (Wednesday September 30 at 8:30 AM ET, source: BEA release schedule) prints at 0.3 percent MoM or above with services ex-shelter (the specific super-core measure) at 0.30 percent or above. Under that combination, the SEP's inflation-forecast trajectory holds and the DXY 101 break is likely to retest.

Invalidated if: Core PCE prints at 0.1 percent MoM or below with services ex-shelter at 0.15 percent or below. Under that combination, the September 21 note's "invalidated if" case triggers three business days late: October FOMC hike odds drop below 30 percent, DXY breaks 100.60, and gold retests 4,400.

Watch next week: Monday September 28 delivers the Chicago Fed National Activity Index at 8:30 AM ET and Dallas Fed Manufacturing at 10:30 AM ET. Wednesday September 30 is the compressed macro release day: Q2 GDP Third Estimate and August Core PCE at 8:30 AM ET (source: BEA release schedule), plus September Consumer Confidence at 10:00 AM ET. Thursday October 1 begins Q4 and delivers the September ISM Manufacturing PMI at 10:00 AM ET (the ISM print the flash-PMI framework flagged as the specific cross-check on this Wednesday's 57.0 flash reading). October 3 is Nonfarm Payrolls.

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