Physical trade boost
Crude prices climbed back above 74 $/b at the prompt, confirming that the liquidation experienced last week could be short-lived. Indeed, geopolitical risk in Saudi…
The exit from the “reflation trade” continued yesterday with a strong decline in equities and new lows for bond yields (1.25% for the US 10y). China fueled growth fears by signaling it could ease its policy very soon again. But the trend seems to be reversing (1.33% now): the sharp fall in bond yields has likely been amplified by technical factors and fears about the impact of the Delta variant on growth exaggerated.
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The ECB unveiled the outcome of its strategic review yesterday and conformed that the inflation target would now be 2% instead of “below but close to 2%”. Like the Fed, the ECB will also tolerate temporary overshooting and asset purchases will now include climate change criteria. The rebound in the EUR/USD that followed the announcement was likely a classic “buy the rumour, sell the fact” move. EUR/USD edged down again overnight to trade around 1.1830 now.
The economic agenda is light today. As explained above, the reflation trade could pick up some steam today.