US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, recovered from one-month top to 2.30% on by the end of Tuesday’s North American session, off multi-day bottom flashed the previous day.
The receding inflation expectations join recently downbeat US data to push back the odds of the Fed’s tapering and help improve the market sentiment.
Recently, US Richmond Fed Manufacturing Index data for August, 9 versus 25 expected, joins the first rise in the New Home Sales in four months to weigh on the push back the Fed’s tapering concerns as policymakers brace for Jackson Hole Symposium. The mixed data currently looks at the US Durable Goods Orders for July, forecast -0.3% versus +0.9% prior, for further firming up odds favoring the need for easy money policies.
Even as the reflation and tapering fears soften, the US 10-year Treasury yields rose four basis points (bps) to 1.297% at the latest but failed to underpin the US Dollar Index (DXY) upside. That said, the greenback gauge dropped for three consecutive days by the press time.
It’s worth mentioning that the virus woes and geopolitics challenge the latest risk-on mood, also joined by the cautious mood ahead of the Jackson Hole Symposium. However, vaccine optimism, stimulus and easing strength of the tapering tantrums seem to back the risk-on mood.