Nagel: ECB Rate Hike in December Looks ‘Rather Obvious’ (Video)

Bundesbank President Joachim Nagel said a rate hike by the European Central Bank in December looks "rather obvious," signaling that a policy tightening at the next meeting is a leading option among Governing Council members. The transmission to markets runs primarily through the rate differential channel: expectations of a higher ECB deposit rate narrow the yield gap with other major central banks, which tends to support the euro against currencies where policy is seen as on hold or easing. The euro (EUR) and short-dated euro-area sovereign yields, particularly German Bund and Italian BTP front-end tenors, are most directly exposed, as repricing of the policy path feeds immediately into money-market curves and overnight index swap pricing. The next catalyst for traders is the flash euro-area HICP inflation release, whose core component will determine whether the inflation trajectory justifies the tightening Nagel is signaling ahead of the December Governing Council decision.

The Euro (EUR) is the currency of 20 European Union member states. Major EUR movers include ECB Governing Council decisions, Eurozone CPI prints, Bund/BTP spread events, and political risk from France, Germany and Italy.

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