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Germany's 10 year inflation-linked bond yield falls to record low at -2.1%. It suggests markets expect inflation to come down from the high levels witnessed this year. Germany's bonds are typically seen as "safe-heavens" in Europe. Positive news around a faster re-opening (stimulates growth), should reduce deflationary pressures. 

ECB President on Friday suggested Eurozone inflation is transitory and most likely peaked after November’s reading of 4.9%, well above the 2% target set by the ECB. According to Lagarde, 55-60% of recent inflation came from rising energy prices, which should decline by the end of 2022 (excluding energy, inflation reads 2.5%). Lagarde also noted the ECB had more tools available to continue to provide favorable conditions, after the expected end of asset purchases in March 2022. The comments imply that the ECB could remain very accommodative for longer than previously anticipated and could in turn continue to pressure the EUR.

Newly jobs created in the US (non-farm payrolls) missed analyst expectations with fewer jobs created than expected. Combined with rising Covid risks, it should add pressure to the economy and perhaps ease inflation concerns. A weaker jobs report implies a more concerned Fed that should keep providing support and liquidity to the economy for longer. 

It is no secret that strong disinflationary forces are at work with the power of innovation, technology, shared economy etc... but the last few months have been about inflation fears! There are straight-forward explanations such as the year-on-year base effect with the fall of commodities prices during Covid, but a deeper dive reveals a much more complex picture, leaving many experts worried about continued #inflation, amid rather loose fiscal and monetary policies. Cost of shipping across the ocean from Asia to both US coasts, at the heart of supply chain deadlocks hurting small businesses particularly, are revealed to be coming down, reaching their lowest level since July, according to Bloomberg. These in turn should put less continued pressure on retailers to raise prices. Stay tuned!

The Eurozone consumer price inflation is expected to accelerate to 4.9 percent year-on-year in November 2021, from 4.1 percent in the previous month and above market expectations of 4.5 percent, a preliminary estimate showed. It would be the highest rate of inflation since July 1991, and well above the European Central Bank's target of 2.0 percent. Energy cost should rise sharply , followed by solid increases in prices of services.