Since mid-September, traders have scaled back their expectations for European Central Bank (ECB) rate hikes by approximately one quarter-point. This adjustment is linked to financial stress stemming from a selloff in French debt, which has raised concerns about further tightening by the ECB.
According to FX Street, market participants now anticipate the ECB may pause its rate increases, reflecting worries over the stability of French government bonds. This shift marks a notable change in outlook for the 2022-23 monetary policy path.
For Japanese investors, monitoring ECB policy remains crucial as changes in European rates can influence global risk sentiment and impact FX and equity markets, including yen volatility against the euro and dollar.