Global week ahead: Price pressure in the pipeline

• European bond yields surged to crisis-era levels, with French 10-year yields reaching highs not seen since the 2011 European debt crisis, while UK yields hit 6-month peaks with markets pricing an 82% probability of a BOE rate hike
• Fed rate cut expectations collapsed to just 20 basis points by year-end, with a 2026 cut no longer fully priced in for the first time, despite President Trump's public pressure on Chairman Powell to cut rates immediately
• Multiple central banks meet this week: Fed (Tue-Wed), BOE and ECB (Thursday), plus Bank of Canada and Swiss National Bank, with analysts warning oil at $140/barrel could trigger mild recession in worst-case scenarios

Summary: Global Week Ahead - Price Pressure in the Pipeline

Key Developments

Major central banks face critical policy decisions this week amid escalating inflation concerns and geopolitical tensions. The Federal Reserve, European Central Bank, and Bank of England are all set to announce monetary policy decisions, with markets dramatically repricing rate expectations.

Market Movements

Sovereign bond markets experienced significant sell-offs last week, particularly in Europe. German 10-year yields hit their highest levels since October 2023, while French yields reached peaks unseen since the 2011 European debt crisis. UK 10-year yields climbed to six-month highs, with markets now pricing in an 82% probability of a Bank of England rate hike this year.

For the Federal Reserve, rate cut expectations have collapsed to just 20 basis points by year-end. Notably, a 2026 rate cut is now not fully priced in for the first time, according to Deutsche Bank.

Central Bank Outlook

Federal Reserve (Tuesday-Wednesday): President Trump continues pressuring Fed Chair Powell to cut rates immediately, though market conditions suggest the opposite. Analysts note elevated chances Powell may continue beyond May due to current volatility.

ECB (Thursday): Expected to hold rates despite President Lagarde's assurances Europe can absorb inflation shocks. However, policymaker Peter Kazimir suggested potential earlier-than-expected hikes.

Bank of England (Thursday): Anticipated to hold rates at 3.75%. Oxford Economics warns a worst-case scenario of $140/barrel oil could trigger higher inflation and mild recession.

Additional Meetings

Other central banks convening include the Reserve Bank of Australia, Bank of Canada, Swiss National Bank, and Sweden's Riksbank.

The convergence of Middle East tensions and persistent inflation risks has created what Deutsche Bank calls "the most hawkish central bank pricing" this year.