ECB Seen Hiking Rates This Week, Euro's Reaction Key

MUFG expects the European Central Bank (ECB) to raise interest rates this week at its policy meeting in Berlin, hosted by the Deutsche Bundesbank. The meeting takes place from September 9-10 and a 25bp increase is already priced into markets.

According to MUFG, the reaction of the euro and euro-zone rates will depend on the central bank's updated guidance rather than the decision itself.

The rates market has become more hawkish over the summer, supported by rising natural gas prices that have climbed to fresh highs since the US-Iran conflict began.