ECB preview: are markets right about another rate rise?

Markets are pricing in a further 25 basis points next week and another in July before pausing for the rest of the year. This is according to a poll conducted by Reuters which indicated that economists believe inflation across the single currency economies remains sticky. Will it come to pass, or will we see a further contraction in growth in Germany that may give the ECB pause for thought? Well, the same poll suggests that while Germany and the eurozone as a whole fell into a winter recession, there may be expansion in the second quarter (Q2) this year, which could change things for the ECB.

(Video Transcript)

The European Central Bank

Now after the Fed decision on Wednesday, we get the European Central Bank (ECB) on its decision at around lunchtime on Thursday. The European Central Bank is widely expected to raise the key interest rates by 25 basis points at this meeting, and again in July before pausing for the rest of the year.

This is according to a poll conducted by Reuters, which indicated that economists believe inflation across the single guarantee economies remains.

Eurozone

Sticky after 375 basis points of rate hikes over the past year. Economic activity across the region has slowed with Europe's biggest economy, Germany and the Eurozone as a whole, sliding into that winter recession that we've been recording that same poll. Also said both Germany and Eurozone are expected to rebound this year.

This quarter with Eurozone growth of 0.2% in each quarter, for the remainder of the year. One of the big trades out of this will be what's happening with the Euro/Dollar trade.

And we can have a look at this now to take a look at what's going on. But when looking at this, you must bear in mind that the ECB decision comes after the Federal Reserve decision on Wednesday, the previous evening.

Now we've seen big rise for the euro this week, and in fact, it looks like we could, will end up with gains overall in the week. Euro is up against the US Dollar and up against other currencies as well, currently trading at 10780.

Now if there is any hint that we do get a continuation of the hawkish stance from the Euro area, the ECB, there is the potential for further homicide Dakota for that euro/dollar trade.