Marketmind: The ECB won’t throw a curve ball

A look at the day ahead in European and global markets from Vidya Ranganathan

After a slight jolt overnight from the hawkishness surrounding the Fed’s pause, investors can afford to be relaxed ahead of the European Central Bank’s policy decision later on Thursday.

It’s a given the ECB will deliver its eighth straight rate hike of 25 bps, and confirm that the pace of quantitative tightening will pick up.

They might hike again in July and September, is the broad view, putting the inflation battle ahead of the growth slowdown.

Macro forecasts are also due but are unlikely to change ECB President Christine Lagarde’s determination and view that “there is no clear evidence that underlying inflation has peaked”.

Never say never, but ING believes markets are “priced to perfection” for the ECB, with at least two rate rises, including Thursday’s, in the price.

The Fed left its benchmark funds rate window at 5-5.25%, and chair Jerome Powell said the U.S. central bank needed to gather more information about the economy to determine what to do next.

The Fed’s dot plot projected two more 25 basis point hikes this year, causing markets to push short-term U.S. yields higher and close out bets on any cuts in 2023. [US/]

In Asia, Japan’s stock market continued to scale fresh 33-year highs, while China’s economy continued to underwhelm. Data on industrial output and retail sales fell short of market forecasts, in the latest sign the economic recovery isn’t living up to hopes.

China cut a key benchmark, its medium-term loan rate, by 10 bps and the yuan hit a six-month low of 7.1783 per dollar. [CNY/]

Later in the day, Turkey presents May central government budget data, bringing the focus back to its twin deficits, its plunging lira and how aggressively newly appointed Governor Hafize Gaye Erkan will hike rates on June 22 to tame skyrocketing inflation.

Key developments that could influence markets on Thursday:

Euro group finance ministers meet in Brussels

Eurozone trade data, ECB rate decision at 1215 GMT, Bank of England’s Jon Cunliffe speaks