The jump in yields this week is also helped by more aggressive market pricing on the ECB’s outlook, following a record reading of consumer inflation.
The OIS market is now pricing in nearly three rate hikes by the ECB this year, which says a lot about the state of the market versus what the ECB is selling. There is a major gap in this direction.
Looking ahead to the ECB today, I doubt policymakers will want to fan the flames and confirm the latest market moves. If anything, I would expect a more cautious approach and a statement that will signal that they still see inflation as contained, but perhaps not as they predicted.
This could disappoint the Euro and bond sellers later in the day.