11:50 AM EDT, 05/10/2024 (MT Newswires) -- The US dollar reversed earlier losses to trade higher almost across the G10 board in North American trade on Friday after University of Michigan data showed consumers' short and medium-term inflation expectations rising in May.

Year ahead inflation expectations ticked higher to 3.5% in May from 3.2% last month, the University of Michigan said on Friday, while long-run inflation expectations rose to 3.1% from 3.0%. The data matters because Federal Reserve policymakers believe that consumers' expectations of inflation can influence wage demands, corporate price setting policies and realized inflation rates.

"While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions. They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead," the University of Michigan said on Friday.

Consumer confidence also fell sharply in May with the UoM dropping to 67.4, from 77.2 previously, when consensus estimates had indicated that a more modest drop to 75.0 was likely. Confidence weakened despite gasoline prices falling in April and even as the stock market remained close to record highs. The labor market also remained in a robust condition.

"The slump in confidence is pretty big and it isn't satisfactorily explained by any of the factors listed above. That leaves us wondering if we're missing something more worrying going on with the consumer. We don't think so, but next week's April retail sales figures will provide more insight," said Paul Ashworth, chief North America economist at Capital Economics.

The US dollar rose against all major currencies following Friday's data, though the Canadian dollar and Swedish krona managed to cling onto modest intraday gains even as US government bond yields ticked higher and the market-implied Federal Funds rate for year-end crept up to 4.99% from 4.95% previously.