Confidence is back on the rise

A new strong rebound in risky assets yesterday: +2.1% for the S&P 500, +3.4% for the Eurostoxx 50, the VIX plunging to 22, Brent back above $50/b… etc. The US 10-year rate remains almost stable at around 1.45%, but this is because expectations of a rate hike are clearly rising: the market is no longer very far from predicting a Fed funds rate hike in May 2022. The 2-year rate has rebounded by 20bp in one week, to its highest level since early March 2020.

The main reason for this return of optimism is still the news about the Omicron variant, which is apparently highly contagious but not very aggressive. The WHO is also reassuring about the effectiveness of vaccines. Europe is still struggling with the Delta variant, but the economic consequences of the various containment measures may remain relatively limited at the macro level. This is suggested, for example, by the Banque de France’s latest business survey.

The economic calendar remains rather light today. The EUR/USD exchange rate is not far from 1.13.

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