Bank of America ahead of the European Central Bank (ECB) meeting.
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- The bank anticipates a 25 basis point hike from the ECB this week, accompanied by indications of further tightening down the line.
- However, BofA analysts believe that the ECB is likely to be unclear about whether this means one or several additional hikes. The bank notes that there isn't significant pressure or need for such a signal in this week's meeting.
- Forecast variations are likely to continue causing divisions, with predictions of higher near-term core inflation but medium-term inflation aligning with the ECB's target. BofA maintains a bearish stance on the front-end and predicts that yield curves may not steepen as much as anticipated.
- The bank suggests Euribor-€str could widen, while swap spreads might tighten. As for the Euro (EUR), BofA sees balanced risks, given that the market has already priced in rate hikes for both this meeting and the next. The projections align with the anticipation of tightening monetary policy in the Eurozone.
- Investors and analysts will be closely watching the ECB's meeting tomorrow to gauge the bank's stance on the rate trajectory and its impact on the market.
ECB due at 1215 GMT (European Central Bank President Lagarde follows at 1245 GMT)
- 815 and 845 US Eastern time:
