The euro area is roaring in Q3 to a post-crisis peak level of growth as unemployment (7.6% in July) continues to drop and inflation continues to rise. Elsewhere however, downside pandemic risks are materialising. The US and Asia are battling surging cases of COVID-19 Delta variant and the World Health Organization has designated mu a fifth current "Variant of Interest".
Europe is approaching its post-crisis peak growth. In the US, job creation has fallen short and consumer confidence has weakened as the Delta variant spreads; Mu becomes a fifth WHO "Variant of Interest".
We see sustained US inflation pressure as job market friction drives up wages, and rising inflation in Europe and the UK.
Emerging markets tighten monetary policy to bolster currencies ahead of tapering in the US and euro area.
We revise down our 10y yield forecasts for the US, euro area and UK as pandemic downside risks start to materialise.