US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, decline for the third consecutive day to test lowest levels since November 05 by the end of Monday’s North American session, per the data source Reuters.
In doing so, the inflation gauge eyes the monthly bottom surrounding 2.50% while flashing 2.52% level at the latest.
The fall in the inflation expectations could be linked to the market’s receding fears over the South African variant of the coronavirus after experts and policymakers reassessed Friday’s heavy risk-off action. Adding to the market optimism were the latest comments from US President Joe Biden and prepared remarks from Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen.
It’s worth noting that the easing hopes of inflation and Fed’s Powell citing covid fears cut the previously hyped odds of the Fed rate hike and may weigh on the US Dollar Index (DXY), defending 96.00 level so far following a pullback from the 16-month top.