Citing sources familiar with the European Central Bank’s (ECB) thinking, Reuters reports that the ECB policymakers are likely to discuss a rate hike worth 25 bps or 50 bps at Thursday’s meeting.

“ECB policymakers home in on a deal to make new bond purchases conditional on next generation EU targets and fiscal rules,” the sources added.

The sources said, "these include the targets set by the Commission for securing money from the European Union Recovery and Resilience Facility as well as the Stability and Growth Pact, when it is reinstated next year after the pandemic break."

Market reaction

Eurozone bond yields rise, with Germany's two-year bond yield now up 6 bps on day at 0.58%.

The euro jumped in tandem after the source-based ECB story, last up 0.80% on the day at 1.0219. The pair spiked to the day's high of 1.0229 in an immediate reaction to the headlines.

So far this week, EUR/USD is consolidating a massive sell-off after reaching parity just before the Fed hikes interest rates by 75 bps on July 27. Should the ECB fail to narrow the gap with its US counterpart the pair is likely to fall further below parity once again.

EURUSD Technical levels to watch