Swissquote: Will ECB rate hikes extend to next year?
The euro selloff might slow on the back of higher ECB rate bets, but not reverse.
The hawkish bets regarding the European Central Bank (ECB) rate hikes intensify. Swap markets now price in a rise in the ECB’s deposit rate to 3.9%, while this pricing was just around 3.5% last summer. Plus, for the first time, traders bet that the ECB rate hikes will extend to the next year.
The hawkish ECB bets are normally positive for the euro, but the Fed hawks say the last word. We could eventually see the euro selloff slow on the back of higher ECB rate bets, but not reverse.
A few European countries will reveal their latest CPI updates before Thursday’s flash estimate for the zone, while Australia will also announce the latest CPI figure tomorrow. Inflation in Australia is expected to have fallen to 8.1% from 8.4% printed a month earlier. A stronger-than-expected read could fuel the Reserve Bank of Australia (RBA) hawks, but could hardly reverse the Aussie’s trajectory against the dollar. The pair fell sharply and it's now in the bearish consolidation zone.