US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data, justify the market’s latest favor to the US Dollar as the early signals for the US price pressures get firm of late.

That said, the 10-year FRED gauge extends Friday’s rebound to 2.23%, the highest level since May, whereas the 5-year counterpart track the moves by rising to a one-week high of 2.22% by the end of Monday’s North American trading session.

Given the upbeat US Treasury bond yields and recently firmer inflation signals, the US Dollar Index (DXY) holds grounds above 101.00 despite staying near the Year-To-Date (YTD) lows.

However, the cautious mood ahead of this week’s US Consumer Price Index (CPI) prods the greenback buyers. On the same line could be the looming fears of US default and dovish Fed hike, not to forget mixed signals from the Nonfarm Payrolls (NFP).

Above all, a light calendar and cautious mood ahead of the key US data, as well as the market’s consolidation after a volatile week, challenges the US Dollar moves of late even if the inflation clues are price-positive.

Also read: Forex Today: AUD and NZD continue to outperform, while USD gets support from Treasury yields