US inflation expectations rebound from six-week low

US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, justify the market’s latest reassessment of the Federal Reserve (Fed) concerns by bouncing off the multi-day low on Monday. In doing so, the inflation precursors favor the easing talks of the Fed’s policy pivot, as well as the rate cut, during 2023, which in turn underpin the US Dollar’s strength.

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That said, the Five-year and 10-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) bounced off the lowest levels since March 20 to 2.24% and 2.23% respective figures by the end of Monday’s North American session.

The latest recovery in inflation precursors joins the market’s fears of US debt ceiling expiration, as well as a relief from the First Republic Bank crisis, to help the US Dollar. However, the return of the full markets after Monday’s holidays in major bourses joins the cautious mood to prod the greenback buyers.

With this, the US Dollar Index (DXY) struggles to defend the week-start run-up near the highest levels in a fortnight, staying defensive near 102.10 by the press time.