US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, rose for the fourth consecutive day by the end of Tuesday’s North American session.
That said, the inflation gauge rose from 2.63% to 2.64% amid hawkish Fedspeak and mostly upbeat US data.
On Tuesday, hawkish Fedspeak and upbeat US data favored the US dollar to recover from the multi-day low. Fed Board of Governors member Christopher Waller said that he supports lifting interest rates by another 50 bps at the next several Fed meetings and that the policy rate should be above neutral by the end of the year to reduce demand, reported Reuters. On the other hand, the US Chicago Purchasing Managers’ Index and CB Consumer Confidence both rose past forecasts for May whereas the Dallas Fed Manufacturing Business Index dropped to the lowest levels in two years.
It’s worth noting that the increase in inflation expectations contrasts with the softer prints of the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for May. However, the latest comments from US Treasury Secretary Janet Yellen highlight inflation fears and hints at the further tightening of the Fed’s policies.
The firmer inflation expectations join the fears of increasing price pressure and may help the US dollar to extend recovery moves from the monthly low, marked on Tuesday.
Read: US Dollar Index aims to balance above 101.80, focus shifts to hawkish Fed bets, US PMI eyed
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