Inflation data, in the spotlight to achieve global economic recovery

The pandemic has marked a turning point in the macroeconomic landscape and monetary policy in the last almost two years, with important consequences for bonds. After a decade with low growth and inflation rates and zero-negative rates, the economy is experiencing a moment that could be summarized as follows: pace of activity with estimated long-term potential, where the IMF estimates growth of +4, 4% in global GDP by 2022 and +3.8% in 2023 vs. +5.9% in 2021, inflationary pressures on the supply side (raw materials and bottlenecks) and demand (excess savings/liquidity of families and companies with unemployment rates close to pre-pandemic levels) and public sector indebtedness reaching historically high levels.

The Public Debt/GDP ratio in the United States reaches 122.6% in the third quarter of 2021 (vs 106.9% in 2019) and 97.7% in the Eurozone (vs 83.6% in 2019 vs 60.0 % objective). The European Central Bank, however, is going more slowly and sees a rate hike for 2022 as premature. The strategy of the different Central Banks seeks to avoid a scenario of uncontrolled inflation and low growth, as in the 70s/80s, which which is bad news for bonds, which face a protracted environment of rising IRRs (price falls).

In Germany yesterday the unexpected rise in inflation (0.9%) was surprising, which led the Bund to positive territory. As for Italy, the political situation stabilizes with the re-election of Mattarela. With our sights set on the next ECB meeting, yesterday we learned about the Eurozone's GDP, which rose 5.2% in 2021, and the inflation data, which rose to 5% in December (maximum level recorded), although the market does not discount the first rate hike until the end of the year. Despite the fact that the most hawkish members of the ECB have expressed their opinion publicly, its president Christine Lagarde is expected to maintain the usual tone in her speech after the meeting on Thursday, reiterating that no rate hikes are expected during this year 2022, despite the high level of inflation.

In the United Kingdom, the political crisis regarding the figure of its Prime Minister Boris Johnson continues with little effect on the price of the British currency against the euro. There are rumors in the market that the Bank of England could raise interest rates again during this Thursday's meeting, which would leave us with the first consecutive rate hike since 2004, after the last one last December.

In the foreign exchange market during the trading session yesterday, Monday, the price of the EUR/USD pair moved in a wide range of 1.1138-1.1249 to end up closing the session recovering the psychological level of 1.12 until reaching 1, 1233. The euro appreciated against the British pound and the Japanese yen to 0.8350 and 129.29 respectively at the close.