Last week, equity markets kept moving higher, while the US yield curve continued to flatten. The 2-10 and 10-30 differentials reached the lowest level since August 2007. President Trump's decision to withdraw from the Iran's nuclear deal pushed oil prices at the highest level since November 2014. This should further support headline inflation dynamics in the coming months.

According to Valérie Quesada and Christophe Dehondt, Rate & Inflation Manager at CPR Asset Management, 2018 is the year of the return of inflation. It returns from the United States and will be transmitted to the Euro Zone. We should see 10-year inflation expectations at 2.4% in the United States and 1.5% in Europe ...

While the US macroeconomic data flow last week was on balance broadly in line with expectations, euro area data surprised again on the downside intensifying concerns about a slowing economic momentum.

This move was widely anticipated and marks the sixth rate hike during the current tightening cycle—with more to come. Within the Federal Open Market Committee (FOMC) text, the biggest change to the Fed's statement was on the inflation front, where the timeframe for reaching its 2% target quickened.

The increase in inflation has been considered as one reason for the correction. Accelerating inflation is related to the tightening of central banks' monetary policy and the rise in the interest rate level, which may be a burden on economies and equity markets.