Monetary cliff

The last few weeks must have been trying for deglobalization advocates, shading light onto a world where New Zealand inflation and aggressive Canadian monetary tightening are turning into rate hike expectations from the ECB and the Fed. The global feeling that the inflationary pressures set a crash course to a wall of monetary tightening is perfectly integrated into the various yield curves, regardless of the economic situations and the forward guidance of the central banks. Another lesson from the long end of the curve is that this strong monetary tightening should have a negative impact on growth. The task is therefore difficult for the dovish central banks: the BoC meeting had more impact on the € curve than the ECB meeting. And the reaction of the $ curve next week will depend as much on the FOMC as on the BoE's decision to raise rates or not. For rates markets, words are no longer enough.