Something for your Espresso: The missing link is on the move..
Morning from Europe!
Broad Commodities (BCOM) have rallied significantly, yet oil/energy has been the missing piece in the re-inflation puzzle. However, oil is gaining momentum ahead of the OPEC+ virtual meeting this week. The Saudis have seemingly pre-communicated their intent, suggesting that supply cuts will continue into the second half of the year, despite recent doubts from Iraq.
This unexpected uniformity in the commitment to cuts is bullish for oil prices now. Traded inflation expectations haven’t reacted much to the broad commodity rally, but with oil likely joining the trend, we could see a swift catch-up in inflation expectations.
Chart 1: Mind the gap?
Inflation expectations could be on the move if the recent trends in energy space persist. Energy has been the missing re-inflationary link in recent weeks, but there is momentum ahead of the virtual OPEC meeting.
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