German CPI Tomorrow: Why The Euro Might Need Inflation

But bond yields have increased in Europe?

One of the signs the market expects inflation to go up is that bond yields rise. And that happened at the start of the year, with the roll-out of the vaccines.

There was a pretty strong consensus that Europe had a better chance of outperforming its peers, as it had more recovery to do. But by February, it became pretty clear that Europe was lagging far behind in the vaccine rollout, and new lockdowns would be necessary.

Even before the latest announcements on confinements, bond yields had been moving lower, with the euro following suit.

With Europe not expected to vaccinate enough people until after the summer, the region could remain under economic stress. Low inflation could be a sign for bond yields to stay negative.

As other countries see their yields rise, the euro could remain under pressure for some time. It’s a good reason to keep an eye on CPI figures for now.

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