We just got the release of Spanish and German Regional CPI this morning, and with the two making up 40% of the EU HICP basket, there might be some information to extract from today’s prints.
Could a right-wing government in Spain follow in the footsteps of Meloni’s crusade against the EU economic framework? Tensions are high as we gear up to the all-important General Election on Sunday.
Just as the weak growth surveys in Europe had established a short-term downtrend in EUR rates, the inflation ghost is back wreaking havoc with that narrative. The inflation numbers from Europe were not that bad, but markets are heavily positioned in long bonds.
We now officially have POSITIVE real Fed Funds rates in the US, while we remain on inflation watch in Spain on Monday. European inflation is falling apart as well.