US inflation expectations rebound from multi-day low

US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data justify the recent hawkish commentary from Federal Reserve (Fed) Officials and keeps the US Dollar buyers hopeful, despite its latest weakness.

That said, the US Dollar Index (DXY) dropped the most in a week while snapping the three-day recovery the previous day amid mixed data.

It’s worth noting that the latest prints of the 5-year and 10-year inflation expectations portray a rebound from the multi-month low to 2.21% and 2.20% respectively. That said, the 5-year precursor of the inflation dropped to the lowest levels in two years while the 10-year counterpart refreshed a 23-month low on Wednesday.

On Thursday, Federal Reserve Vice Chair Lael Brainard said that it will take time and resolve to get high inflation down to the fed's 2% target. The policymaker also added, “The policy will need to be sufficiently restrictive for some time.” On the same line, Boston Fed President Collins signaled that the baseline remains that the effective fed funds rate should settle slightly above 5.0%, implying three more 25bp rate rises.

Given the recently upbeat US inflation expectations and the hawkish Fedspeak, the riskier assets may witness further hardships.

Also read: Forex Today: The focus remains on sentiment