US Inflation expectations refresh two-week high ahead of Core PCE Price Index

The US Federal Reserve (Fed) policymakers, including Chairman Jerome Powell, recently praised the easing in inflation numbers to signal easy rate hikes starting in December.

However, the US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, challenge the dovish bias by refreshing the multi-day high. The same should challenge the US Dollar bears ahead of the Fed’s preferred inflation gauge, namely US Core Personal Consumption Expenditure (PCE) Price Index for October, expected 5.0% YoY in October versus 5.1% prior.

The latest prints of the 5-year and 10-year inflation expectations rose to 2.41% and 2.34% respectively to reach the highest levels since November 15.

That said, the US Dollar Index (DXY) snapped a three-day uptrend while portraying the biggest daily loss in a week the previous day, not to forget mentioning the biggest monthly fall since September 2010. It’s worth noting that the Wall Street benchmarks cheered the dovish remarks from Fed Chair while the United States 10-year Treasury bond yields reversed the early gains to end November on a negative footing around 3.61%.

It should be observed that the DXY extends the previous day’s losses to 105.55 while S&P Futures print mild gains and the Asia-Pacific shares are also up by the press time.

To sum up, the inflation precursors warrant the USD bears to remain cautious ahead of the key US data.

Also read: US October PCE inflation & ISM Manufacturing PMI Preview: Seen through Fed’s eyes