The ECB’s complicated exit

Global assets remain highly correlated, but it seems we are on the cusp of a more significant divergence in monetary policy and indeed the macro landscape, comparing the Eurozone with the US. That should begin to erode these linkages, particularly in bond markets. While there are clearly risks on the eurozone inflation front, the ECB looks well placed to deal with these. Many of the price pressures present in the US, that are contributing to persistent inflation stateside are not embedded in the single currency zone. So while the Fed tries to catch up, the ECB has more room than the market thinks.

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