Although inflation is still running rampant across Europe, we are seeing inflation expectations dip with the key market gauge of long-term inflation expectations in the region falling back below the 2% mark - the first time since March.
To me, this is a read that the market isn't keeping all of its focus on the inflation basket at the moment and there are other moving parts worth paying attention to. For one, it is perhaps a sign that central bank tightening expectations are slowly being tempered with. That is evident in bond yields, with 10-year German bund yields also having fallen from 1.90% to 1.28% in recent weeks.
In the case of Europe, recession risks are on the rise as the gas crunch threatens to worsen once the summer passes by.
I won't read this as a sign that inflation pressures are going to cool off considerably but it is a suggestion that we could have seen a peak in bond yields at least - something worth taking note of as per the USD/JPY debate earlier here.
