For USD… it’s all about inflation expectations

Check out the tight correlation between the trade weighted USD index and the US 10-year breakeven inflation rate (difference between the yield on the 10-year treasury inflation protected securities and the 10-year treasury yield).

No wonder, the oil rally is helping the USD today – as it lifts inflation expectations and more so because the euphoria about the major central banks turning hawkish seems to have waned off today.

fredgraph (2)

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