US inflation expectations defend Fed hawks and US Dollar bulls

US inflation expectations can be held responsible for the recent run-up in the US Treasury bond yields and the US Dollar, despite the market’s latest consolidation.

That said, the inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, rose in the last three consecutive days to end Wednesday’s North American session at the highest level in a week.

With this, the 5-year and 10-year inflation expectations per the aforementioned calculations rose to 2.23% and 2.30% at the latest.

It’s worth observing that the Fed officials’ ability to please US Dollar bulls with hawkish statements and upbeat Fed Beige Book report join the firmer US inflation expectations to keep the USD buyers hopeful despite the latest retreat from the yearly high.

Moving on, the weekly US Initial Jobless Claims and the quarterly readings of Nonfarm Productivity, as well as the Unit Labor Costs for the second quarter (Q2), will decorate the calendar but speeches from multiple Fed officials will be the key to watch.

Also read: Forex Today: US Dollar holds firm on risk aversion and US figures; China trade data next