ECB Hawk Talk and Its Ripple on Peripherals

Reading some of the comments coming out of the ECB today – particularly from Knot – it's pretty clear the hawks are digging in their heels for more rate hikes. Not necessarily a surprise, but the conviction behind it seems to be solidifying, even as growth forecasts soften a bit. They seem more concerned with inflation expectations becoming entrenched than with a potential mild recession at this point.

This kind of hawkish resolve from the ECB has me looking at how the peripheral spreads might react. While the market has priced in a good chunk of tightening, prolonged aggressive rhetoric could put pressure on the weaker Eurozone economies, even if just sentimentally. Also keeping an eye on $USDSEK; if the euro finds some legs against the dollar due to a more aggressive ECB, that might indirectly firm up the SEK a bit, though its own domestic issues are still weighing. It's not a direct correlation, but a stronger common currency gives a little breathing room. For now, just watching bond yields across the board for any significant divergence.