US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data jumped to the highest levels last seen during August 2006 by the end of Monday’s North American trading.
In doing so, the risk barometer extends recovery moves from late September while flashing the 2.66% mark at the latest.
The same favors US Treasury yields to stay firmer despite risk-on mood. The reason could be linked to Friday’s speech from Federal Reserve (Fed) Chair Jerome Powell. “”Risks are clearly to longer, more persistent bottlenecks, and thus to higher inflation,” said the policymakers per Reuters.
It’s worth noting that the US dollar witnessed a rally in the past when the US 10-year Treasury yields crossed the 1.70% mark.
That said, the US Dollar Index (DXY) keeps the previous day’s rebound from monthly low, up 0.07% intraday around 93.90 at the latest.
Given the firmer expectations, the Fed tapering concerns elevate and hence Thursday’s preliminary US GDP for the third quarter (Q3) becomes all the more important.