The euro is down 7 pips to 1.1601 today
MUFG Research discusses its expectations for this week's ECB policy meeting on Thursday.
"We believe that there is a good chance that the ECB will push back against current market pricing for ECB rate hikes. The European rate market has got carried away alongside the hawkish repricing of rates globally, and has moved to price in an ECB rate hike in the next two years," MUFG notes.
"The current pricing appears inconsistent with the new forward guidance adopted by the ECB in July which lifted the bar for delivering rate hikes. Above target inflation will need to be well advanced on a sustainable basis within the forecast horizon before a rate hike is justified," MUFG adds.
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