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Euro Area

The Mystery Of Inflation Expectations, Finally Solved

In this Special Report, we describe how inflation expectations are formed. We then demonstrate that steady state inflation expectations have un-anchored in the UK, are un-anchoring in Japan, and are at high risk of un-anchoring in the US. And we conclude with some implications for bond markets.

Counterpoint by Dhaval Joshi
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A Profitless Rally
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March PMIs Flash Inflation
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Flash PMIs Point To Gradual Growth Recovery
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Relative Macro Momentum Favors The US
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Still No Escape Velocity For European Sentiment
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Anatomy Of An Inflation Undershoot

The ECB is about to make its first policy mistake in the current cycle by being complacent about the downside risks to inflation. The confluence of base effects, a stronger euro, food and energy deflation, and rapid services disinflation will push headline inflation closer to 1% in the first half of the year. This significant undershoot will force the ECB to deliver reflationary cuts. Go long the September 2026 3-month Euribor futures and tactically reduce exposure to inflation-linked bonds in the Eurozone.

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Europe: Flipping The Script
Peripheral Europe is driving the region’s resilience, and finally closing the gap with the core. Our Chart Of The Week comes from Jeremie Peloso, Chief European Investment Strategist. The resilience of the European economy and strong equity performance in…
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