Sujata Ro shows us the future.

Philip Lowe, Governor of the Reserve Bank of Australia stood firm against market pricing of interest rate increases this year. He stated that rates will not increase until inflation “sustainably” within the target range.

This hasn’t shaken the markets’ conviction, with an RBA rate hike priced as early as May.

Similar drama could play out in Europe where the markets bet that the European Central Bank will increase interest rates by 10 basis point, nearly three times as often this year. In fact, bets have already been placed on a July change.

To quote ECB boss Christine Lagarde, a 2022 rate rise does seem “very unlikely”. She said that last month, but she has watched strong Q4 economic data trickle in. Monday’s German annual inflation was at 4.9%.

It is possible that euro area prices will grow faster than the ECB’s forecast of 3.2% for this year.

GRAPHIC – When will the inflation in the eurozone peak? https://fingfx.thomsonreuters.com/gfx/mkt/myvmnjmkkpr/ECBFEB1.PNG With ECB rate rise bets piling up and four-five Fed rate hikes discounted already for 2022, the euro bounced off 19-month lows against the greenback and German bond yields rose to the highest since 2019.

If data on Tuesday from jobs shows rising wage pressures, Lagarde may find herself in the same position as Lowe when she meets the markets at the ECB’s February 3 meeting.

Is it now time for the equity selloff to end? The Nasdaq jumped 3.5% on January 31st, leading to a 1.7% increase in global stock prices.

A firmer session seems to be ahead for the moment. Europe continues to see positive news on the earnings front. UBS is the latest European bank to announce record-breaking profits and an impressive buyback program.

Markets should be more informed by key developments on Tuesday

German retail sales fell by 5.5% due to the COVID curbs.

-Russia’s Vladimir Putin meets Hungary’s Victor Orban

India unveils higher Infrastructure Spending in Budget

The UK’s house prices have seen their strongest year-to-year start since 2005. Nationwide

Dec.

Everywhere -PMIs

US construction spending/ISM PMIs/JOLTs

-Riksbank governor Stefan Ingves speaks

-U.S. earnings: UPS, Sirius, Exxon Mobil (NYSE :), General Motors(NYSE:), Gilead, (NASDAQ :), Google (NASDAQ :), Starbucks (NASDAQ :).