Oil Price Surge Sparks Global Market Anxiety Ahead of ECB Hike
Global markets are bracing for the European Central Bank's second rate hike of the year and key US inflation data on Thursday, following a surge in oil prices due to escalating Middle East attacks. Oil prices, which had been volatile in recent weeks, steadied somewhat, helping to stem bond selling that has pushed borrowing costs to decades-long highs.
The region's stocks, euro, and sterling are holding their ground as traders move into the traditional holding pattern ahead of the ECB's interest rate decision later in the day. Columbia Threadneedle's Global Head of Absolute Return Fixed Income, Keith Patton, noted that with the ECB almost guaranteed to hike rates, the key question is President Christine Lagarde's response to inevitable questions about further increases ahead.
'Depending on the language she uses, the market is probably waiting for a more dovish, data dependent call,' Patton said. The market currently prices ECB rates rising to 2.74 per cent by December, implying almost two 25-basis-point hikes. But traders also price in an additional hike by this time next year and roughly a 40 per cent chance of a fourth move.
Benchmark 10-year US Treasury yields nudged up to 4.85 per cent after an eventful previous session that saw Donald Trump promise to pay every US adult a $5,000 'Trump dividend' if his party wins November's congressional elections.