ECB Hike Bets Remain Firm Despite Thursday's Rate Hold

Traders remained confident that the European Central Bank (ECB) will hike interest rates in September, despite unchanged rates on Thursday. Oil prices surged to nearly $100 for the first time in two months, reinforcing the need for further rate hikes to combat inflationary risks.

The ECB kept interest rates steady as expected but left the door open for a potential increase in September. However, some policymakers questioned whether a hike should be considered sooner rather than later, according to ECB chief Christine Lagarde.

'The fact that the market is pricing fully a rate hike for September is warranted by what we see on the energy prices,' said Laureline Renaud-Chatelain, fixed income strategy lead at Pictet Wealth Management. 'And we would really need a steep fall in the oil price for them not to deliver it.'

The market continues to price around a 95% chance of a 25 basis-point ECB rate hike in September and a similar probability of another move by December, in line with expectations before the ECB's decision.