The latest 'ECB sources' leak suggests the central bank is contemplating a slower path of hiking with 50 bps coming in February and then 25 bps in March.

That goes against Lagarde's hawkish rhetoric and has the market rethinking the path of rates. A big beneficiary of lower rates would be highly-indebted Italy and the reaction in the bond market has been swift with Italian 10s down 15.2 bps to 3.86%, which is the lowest since Lagarde's hawkish turn on December 15.

Italy 10y
Italy 10y

The euro has fallen to 1.0825 from 1.0860 on the report as well.

The move has spread throughout global fixed income, weighing on US Treasury yields as well. The big risk in the day ahead is the Bank of Japan decision and the possibility they halt yield curve control.