The USD started the US session on the wrong foot, retreating against most currencies, but made a bullish reversal before the session ended. EUR/USD returned below 1.08, while USD/JPY climbed above 156, which opens the door for further gains toward 160.

One of the reasons for this was the higher inflation expectations by the NY FED, besides comments from FOMC members about keeping interest rates elevated. The New York Fed’s inflation expectations report provides insight into how consumers perceive future price trends and economic conditions. Overall, the report highlights consumers’ concerns about inflation and job opportunities, as well as their expectations for price increases in key sectors like housing and commodities. Here’s a breakdown of the key points:

New York FED Inflation Expectations

1. Rise in short-term inflation expectations: The 1-year inflation expectations have increased to 3.3% from the previous level of 3.0%. This suggests that consumers anticipate higher inflation over the next year.
2. Decline in medium-term inflation expectations: The 3-year inflation expectations have decreased to 2.8% from 2.9% last month. Similarly, the 5-year inflation expectations have risen to 2.8% from 2.6% last month. This indicates some variation in expectations across different time horizons.
3. Confidence in job security: The report shows an increase in confidence among consumers regarding keeping their current jobs but a decrease in confidence about finding new ones. This suggests that while people feel secure in their current employment, they may be less optimistic about job opportunities in the future.
4. Expectations for home prices and commodities: Consumers anticipate increases in home prices and commodity prices, reflecting expectations of inflationary pressures in these sectors.
5. Earnings growth expectations: Expectations for earnings growth have declined to 2.7%, but they remain above pre-pandemic trends. This indicates that while consumers expect some growth in earnings, it may not be as robust as previously anticipated.

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