Fed Hold Expected as Oil Prices Ease, Bank of England Meeting Unlikely to Yield Rate Hike

The Federal Reserve meeting on Wednesday is set to be a pivotal event in the markets this week. With oil prices still volatile, investors are split about whether the Fed will raise interest rates or hold steady. The priced-in probability of a hike is around 30%, but ING Think's economists believe that a hold is more likely.

Oil prices have been under pressure due to ongoing conflicts in the Middle East, and if they continue to ease, it may not be necessary for the Fed to raise rates at all this year. This could lead to significant downward pressure on 2Y USD swap rates.

The Bank of England meeting on Thursday is also expected to be a non-event, with markets giving only a negligible chance of a rate hike. However, ING Think's economists still think that the market positioning is too hawkish and that a hold at the current policy rate of 3.75% is likely.

In the eurozone, inflation numbers are due on Friday, which will be closely watched. The European Central Bank has emphasized the lack of data available to assess second-round risks, making oil prices the most relevant indicator of potential inflationary pressures.