Inflation - EUR
A more hawkish than expected FOMC dot plot essentially sent all major asset classes lower with TIPS/BEs far from unscathed today.
Inflation was drifting into the red shortly before the FOMC today and chunky French supply tomorrow.
A much stronger-than-expected May PPI print gave another point to Team Reflationista. BEs bull flattened as better TIPS/BE selling abated.
Yesterday’s CPI sugar high for the U.S. inflation asset class didn’t last too as real money sellers knocked BEs lower today.
Today’s stronger-than-expected May CPI print woke BEs up from a six-day narrowing spell but selling pressure still remained in the background.
Traders described Europe as rich vs US and noted profit-taking and selling coming back into the market.
BEs remained hellbent on limping into tomorrow’s CPI print as continued end-user selling/profit taking persisted.
The back-end of the euro inflation curve is bid but flows have turned negative amid new shorts appearing.
Risk sentiment recovered from an early hacking scare but BEs didn’t come along for the ride amid more end-user TIPS/BE sales.
Position squaring ahead of Thursday’s CPI print weighed on BEs today against an otherwise bland macro backdrop.