US 10-year inflation expectations rise to two-week top

US inflation expectations rose for the second consecutive day on Tuesday as traders await Wednesday’s Federal Open Market Committee (FOMC) Meeting Minutes.

That said, the inflation precursors, as per the 10-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, rose to the highest levels since September 28 while flashing 2.31% level at the latest.

While noting the details, the longer-term inflation expectations are well above the Fed’s 2.0% target and keep the US Dollar Index (DXY) buyers hopeful even as the previous day’s retreat in the key US Treasury bond yields probed the DXY’s upside momentum.

Not only the inflation expectations and the yields but the hawkish Fed bets also favor the DXY and weigh on the commodities, as well as the Antipodeans.

It should be noted that the CME’s FedWatch Tool signals a nearly 78% chance of the Fed’s 75 basis points (bps) of a rate hike in November. Hence, the market players will look for signals confirming their beliefs to keep the US dollar firmer.

Also read: Forex Today: Dollar resumes advance on risk-averse headlines