US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snapped a four-day downtrend to bounce off the lowest levels since October 12 by the end of Tuesday’s North American trading.
In doing so, the risk barometer licks its wounds around 2.51% as markets await the US Federal Reserve’s (Fed) decision on the monthly bond-buying practices.
With the latest bounce in the inflation expectations, the reflation fears get a new life before the key Fed verdict, which in turn could push the Fed hawks to surpass market expectations of $15 billion tapering of bond purchases. However, Fed Chairman Jerome Powell recently sounded 50-50, despite removing the ‘transitory’ word from his speech to term inflationary pressure, which in turn keeps the traders guessing.
Hence, the risk appetite is likely to remain weak ahead of the Fed event but the US ADP Employment Change and PMIs for October can entertain the traders.
Read: Fed Interest Rate Decision Preview: Inflation, employment and interest rates
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