US inflation expectations jump to highest since 2005

US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, jumped to the fresh high since March 2005 while hitting the 2.76% level by the end of Monday’s North American session.

In doing so, the inflation gauge posts a one-week uptrend, also fueling the Fed rate hike expectations, ahead of the key US Retail Sales figures for October, expected to keep 0.7% MoM growth.

Also portraying the market’s rate hike fears is the jump in the US 10-year Treasury yields to a three-week high, around 1.618% at the latest.

Although the Fed rate hike chatters weigh on the sentiment and favor the US dollar bulls, US stimulus chatters and the Sino-American talks favor the market’s mood of late.

Read: AUD/USD bulls pause around 0.7350 with eyes on RBA Minutes, Governor Lowe

A stronger print of the US Retail Sales data could trim the market’s bullish bias towards the Fed’s next move and may help the greenback to consolidate the recent gains.

Read: US Retail Sales October Preview: Inflation Is the key, not Retail Sales