Economists at TD Securities expect the European Central Bank to hike its key rates by 25 basis points (bps) and announce the new anti-fragmentation tool.

Move to 1.0340/00 in EURUSD risks being a fade

"The risk of a 50 bps hike has grown materially and is almost a coin toss: it is the sensible outcome to the meeting, but goes against recent communications."

"Rates: Risk to rates remains binary to the size of rate hike and details of the tool. We continue to hold a bearish view on the front end via paying EUR 1y1y vs. GBP 1y1y."

"FX: Buy the rumour, sell the fact. Markets should respect the risk for a 50bp 'surprise'. But in doing so, the ECB is pulling forward its limitations to tighten aggressively later in its cycle as energy constraints risk choking off domestic demand. A move to 1.0340/00 in EURUSD risks being a fade."