Deutsche Bank reports that rising Oil and natural gas prices are pushing European yields to multi‑year highs and prompting markets to price a more hawkish European Central Bank path. The bank’s European economists expect small upward revisions to GDP for 2026‑2027 and higher headline inflation for 2027‑2028, while the ECB is likely to maintain a data‑dependent stance without formal forward guidance.

Markets price more ECB tightening

“Meanwhile in Europe, investors also priced in a more hawkish path for the ECB, with an additional +9.0bps of hikes priced in by the June 2027 meeting, meaning that 86bps of further hikes are now priced by then.”

“Looking forward, European rates will stay in the spotlight today, as we have the ECB’s latest policy decision at 13:15 London time.”

“For the decision, they’re widely expected to deliver a 25bp rate hike today, taking their deposit rate up to 2.5%.”

“Our European economists think that there’ll be small upward revisions to the GDP projections for 2026 and 2027, along with higher headline inflation for 2027 and 2028.”

“Otherwise, their view is that the ECB won’t give formal guidance today, and will instead repeat the “data dependent, meeting by meeting, no precommitment” mantra.”