S&P 500 Futures, Treasury bond yields portray cautious optimism ahead of US inflation, Fed Minutes

• Market sentiment remains mildly positive even as challenges to risk appetite unearth of late.
• S&P 500 Futures snap two-day downtrend with minor gains, US Treasury bond yields pause recent rebound.
• Mixed Fed talks, upbeat US inflation expectations and geopolitical tension weigh on the risk profile.
• Easing hawkish Fed bets, hopes of improvement in growth prospects add strength to the upbeat mood.

Risk appetite remains mildly positive as traders discuss an imminent pause to the rate hike trajectory amid easing inflation woes. Adding strength to the optimism could be the recently mixed hawkish Fed bets. However, upbeat inflation expectations and geopolitical concerns prod the sentiment.

While portraying the mood, S&P 500 Futures remain directionless around 4,138 after a mixed Wall Street close. Further, the US Treasury bond yields grind higher and prod the US Dollar sellers. That said, the US 10-year and two-year Treasury bond yields grind higher around 3.43% and 4.03 during a four-day and five-day uptrend respectively. Elsewhere, the Chinese Treasury bond yields drop to the lowest in five months and allow traders to remain hopeful.

Recently, President and CEO of the Federal Reserve Bank of Minneapolis Neel Kashkari teases US Dollar bulls as he said, “2% inflation target should not be changed.”

However, other Fed policymakers have flagged mixed concerns of late and pushed back the Cable bears. Among them, Philadelphia Fed President Patrick Harker said that the Federal Reserve will continue to look closely at available data to determine what, if any, additional actions they may need to take. Before him, New York Fed President John Williams said that if inflation comes down, we will have to lower rates. Furthermore, Chicago Fed President Austan Goolsbee, said on Tuesday that they need to be cautious about raising interest rates after recent development in the banking sector.

It should be noted that the firmer US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, also challenge the US Dollar bulls and the market optimists of late. That said, the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) jumped to the highest levels since April 03 while renewing the weekly tops with 2.29% and 2.36% figures by the end of Tuesday’s North American session.

Elsewhere, the IMF revised down global real Gross Domestic Product (GDP) growth forecast for 2023 to 2.8% from 2.9% in January's report. However, the global lender defends the major central banks’ fight against inflation and defends the hawks, as well as the yields by teasing recession fears.

Moving on, the US Consumer Price Index (CPI) for March and the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting will be crucial for the market players to watch as hawkish bets on the Fed’s 0.25% rate hike in May recede of late.

Also read: Forex Today: Dollar weakens before key US inflation data