US inflation expectations fail to back hawkish Fed bets

US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, hold lower ground near the weekly bottom, which in turn challenges the Fed hawks ahead of the next week’s key Federal Open Market Committee (FOMC).

That said, the aforementioned inflation cursor eased to 2.43% by the end of Friday.

On the same line was the 5-year breakeven inflation rate per the FRED data, which also reversed from the weekly high to 2.57% at the latest.

Behind the moves could be the mixed US statistics. That said, US Retail Sales rose 0.3% in August versus 0.0% expected and July’s revised down -0.4%. Further, NY Fed Empire State Manufacturing Index improved to -1.5 in September compared to -31.3 in August and market expectation of -13. Alternatively, Philadelphia Fed Manufacturing Index declined to -9.9 for the said month compared to 2.8 expected and 6.2 prior. Additionally, US Industrial Production slid to -0.2% in August versus a market expectation for an expansion of 0.1% and downwardly revised prior to 0.5%.

Even so, the market’s hawkish Fed bets keep the US dollar buyers hopeful, which in turn challenges the commodity and Antipodeans. As per the latest readings of the hawkish Fed bets from the CME’s FedWatch Tool, the market priced in the Fed’s 0.75% and 1.0% rate hikes during the next week’s FOMC with 77% and 23% chances.