US inflation expectations snap two-day downtrend

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, rise for the first time last three days by the end of Thursday North American session, per the data source Reuters.

In doing so, the inflation gauge jumps back towards the highest levels since 2005 tested earlier in the week, around 2.73% at the latest.

The underlying reasons could be the firmer prints of the Philadelphia Fed Manufacturing Survey for November, 39 versus 24 expected, as well as softer-than-previous US Initial Jobless Claims of 268K.

It should be noted that mixed comments from the Fed policymakers are also responsible for the latest wobbling of the inflation expectations. Recently, NY Fed President and FOMC Vice-Chair John Williams highlighted inflation fears and pushed for rate action but mixed comments from Chicago Fed President Charles Evans poured cold water on the face of policy hawks.

While the previous two-day downtrend in the inflation expectations could well be witnessed on the US Dollar Index (DXY) and US 10-year Treasury yields, both remain mostly unchanged around 95.55 and 1.589% by the press time. That said, today’s Fedspeak will be important to watch amid a light calendar and hence may trigger a corrective bounce in the DXY and the yields.