US inflation expectations justify downbeat Fed bets ahead of US CPI

US inflation expectations can be held responsible for the market’s dicey mood and downbeat US Dollar performance during early Tuesday.

That said, the inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, drop to the lowest levels in a week while printing a three-day losing streak at the latest.

It should be noted that the 5-year and 10-year inflation expectations per the aforementioned calculations drop to 2.09% and 2.17% at the latest, which in turn raise speculations of witnessing a downbeat US Consumer Price Index (CPI) figure for May. The same will back the dovish Fed bias and can recall the US Dollar bears who have been avoiding the entry of late.

Also read: US Dollar Index: DXY fades recovery below 104.00 on downbeat Fed bets, US inflation eyed

Apart from the likely weakness in the US inflation data and an anticipated fall of the US Dollar ahead of Wednesday’s Federal Open Market Committee (FOMC), the US inflation expectations also justify the recent retreat in the headline Treasury bond yields, as well as sluggish S&P500 Futures.