US 10-year, 5-year inflation expectations jump to two-month high

US inflation expectations remained firmer on Monday, despite the recent risk-on mood, which in turn underpins the hawkish Fed bets and helps the US dollar to pare recent losses.

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 a two-month high in their latest readings.

While noting the details, the longer-term inflation expectations rose to the highest level since August 24, 2022, whereas the 5-year benchmark jumped to August 26, 2022’s high with the latest figures being 2. 59% and 2.72% respectively.

The US Dollar Index (DXY) justifies the upbeat inflation expectations while picking up bids to 112.00, paring the first weekly loss in three.

It should be noted that the CME’s FedWatch Tool prints a nearly 95% chance of a 75 bps Fed rate hike in November.

On the flip side, pre-Fed silence of the US central bank policymakers and downbeat S&P Global PMIs for the US challenge the greenback buyers.