ECB Rate Hike Looms Amid Ongoing Oil Price Volatility

The European Central Bank (ECB) is set to raise interest rates for the second time this year, taking the deposit rate to 2.5% from 2.25%. This decision comes as inflation in the eurozone reached 3.3% in August, with energy inflation surging 14.3%. The hike is fully priced in, but market attention will be on staff projections for growth and inflation, as well as President Christine Lagarde's comments during her press conference.

The ECB's hawkish tone may weigh on European equities, particularly as elevated bond yields are already tightening financial conditions. Further rate hikes could follow before Q3 next year, with market expectations pointing to two more increases.

Meanwhile, oil prices remain above $100 a barrel due to supply disruptions in the Strait of Hormuz and attacks on Saudi energy facilities. A technical analysis suggests that oil may continue its upward momentum towards $104 a barrel or higher.