US inflation expectations jump to two-week top

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, extend the recovery moves from the last Thursday while flashing 2.38% by the end of Wednesday’s North American session. In doing so, the risk barometer jumps to the highest in two weeks while underpinning the tapering concerns.

It’s worth mentioning that the gauge of sentiment challenges the lower high bearish formation established since July 29, suggesting further support to the US Federal Reserve (Fed) tapering chatters should it break the resistance.

Also favoring the concerns over the dialing back of the Fed’s easy money policies were the latest comments from the US central bankers. St. Louis Fed Bank President James Bullard and New York Fed Bank President John Williams backed tapering in 2021 whereas Dallas Federal Reserve Bank President Robert Kaplan makes the case for an October taper despite cutting on Q3 GDP due to covid. 

In addition to the Fed taper woes, coronavirus fears and the pre-ECB sentiment may also back the risk-off mood, which in turn support the US dollar’s safe-haven demand.

Read: US Dollar Index Price Analysis: DXY restores the run-up to 93.20

Moving on, market players are likely to remain cautious, mostly keeping the latest risk-aversion wave, ahead of the key European Central Bank (ECB) monetary policy meeting. Also important will be the weekly US job numbers and headlines concerning the coronavirus as well as the US stimulus.

Read: European Central Bank Preview: Taper on the table, but don’t get too excited about it