Nordea now expects the ECB to deliver four consecutive 25 bp rate rises starting in June, even after ceasefire news in the Middle East. The forecast was updated just before the ceasefire announcement.<\/p>\n
The ceasefire is described as a downside risk to this path, but the forecast is still presented as workable. The view does not depend on further escalation in the Middle East.<\/p>\n
Core inflation is said to have been above target for more than four years. The labour market is described as tight and the economy as resilient, which keeps inflation concerns high.<\/p>\n
Comments cited from ECB Governing Council members suggest there is time to assess conditions. The remarks also point to a June rise being likely, with an April move argued against.<\/p>\n
The longer end of the yield curve is described as supported by this ECB view, a resilient growth forecast, and expectations of higher term premia. These factors are linked to a further rise in longer yields.<\/p>\n
We are now preparing for the European Central Bank to start a series of four consecutive 25 basis point rate hikes, beginning this June. Core inflation has been the primary concern, having stayed well above the bank’s target for a sustained period. The economy’s surprising resilience gives the ECB the justification it needs to act decisively.<\/p>\n
The latest data from Eurostat gives this view credibility, with March 2026 core inflation holding stubbornly at 2.7%, significantly above the 2% goal. Furthermore, the eurozone unemployment rate recently dipped to 6.4%, a multi-year low that signals a tight labor market likely to fuel wage growth. These figures make it difficult for the ECB to justify delaying its hiking cycle any further.<\/p>\n
Recent ceasefire news in the Middle East has certainly eased some immediate concerns, but our focus remains on those underlying price pressures. These domestic inflation drivers, like service sector price increases, were building long before recent geopolitical tensions. Therefore, we believe the ECB\u2019s hiking path is not dependent on external conflicts and remains viable.<\/p>\n
For the short end of the curve, this means positioning for higher rates through instruments like Euribor futures. We are looking at selling futures contracts for the second half of 2026 and early 2027 to reflect the expected hikes. Interest rate swaps that involve paying a fixed rate are also an effective way to position for this anticipated move.<\/p>\n
Longer-term yields are also expected to climb as the market prices in a more hawkish central bank and a resilient economy. This suggests traders should consider bearish strategies on long-dated government bond futures, like the German Bund. Positions such as buying puts on Bund futures will become more attractive as we expect longer-term bond prices to fall.<\/p>\n
We only need to look back to late 2025 to see how the market was caught off guard by the persistence of inflation. Many traders who bet on early rate cuts faced significant losses when the economic data refused to cool down. That historical precedent supports the view that underestimating the ECB\u2019s resolve in the current environment would be a mistake.<\/p>\n","protected":false},"excerpt":{"rendered":"
Nordea forecasts four ECB 25bp hikes from June, despite ceasefire; resilient economy and sticky core inflation.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45267","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45267","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45267"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45267\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}