US 10-year, 5-year inflation expectations renew monthly high

US inflation expectations remained firmer on Monday, despite the risk-on mood, which in turn underpins the hawkish Fed bets and keeps the US dollar buyers hopeful during early Tuesday.

That said, the inflation precursors, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, rose to the monthly high in their latest readings.

While noting the details, the longer-term inflation expectations rose to the highest level since September 14, 2022, whereas the 5-year benchmark matches the September 20, 2022’s high with the latest figures being 2.45% and 2.48% respectively.

The US Dollar Index (DXY) justifies the upbeat inflation expectations while picking up bids to 112.20, paring the biggest daily loss in two weeks.

It should be noted that the CME’s FedWatch Tool prints a nearly 95% chance of a 75 bps Fed rate hike in November. In doing so, the tool might have taken clues from upbeat comments from US Treasury Secretary Janet Yellen, suggesting a strong US jobs market.

Additionally, China’s zero-covid policy, delaying of the key data/events and determination to defend the might of taking control in Hong Kong and Taiwan also challenge the market’s sentiment and can renew the US dollar’s safe-haven demand.

Also read: US Dollar Index Price Index: DXY bears stay hopeful below 21-DMA around 112.00