Once Greece is played out as a theme in the market, attention will turn back to the ECB’s QE programme and especially inflation. With the present pricing of inflation very low, Saxo Bank’s Head of Fixed Income Simon Fasdal believes it could surprise to the upside in the longer term.

In his latest #SaxoStrats video, Fasdal sets out three key assumptions underpinning the trade.

1.       The impact of the ECB’s massive QE programme.

2.       The impact of lower oil prices

3.       How a combination of QE, low yields, high asset prices as well as higher economic activity will add to economic growth, which will put inflation firmly back on the market’s agenda.

Fasdal likens the scenario with a jumbo jet, waiting on the runway with the engines roaring, but the brakes on. Once the brakes are off, things will move pretty quick, he says.

The trade is not based on a large increase in inflation, but rather a correction of the current price of inflation, Fasdal says.