On Thursday, investors braced themselves for a signal from the European Central Bank that it is prepared to raise interest rates for the first time in a decade, while the yen fell to a new 20-year low on wagers that the Bank of Japan will lag far behind.

There was little else deserving of attention. How quickly the ECB will now raise the euro zone's sub-zero borrowing costs has dominated markets for months as part of the most extensive global monetary policy tightening in decades.

Bond dealers commemorated the occasion by driving the yield on Germany's 10-year government bonds - the primary proxy for European borrowing rates - to its highest level in almost eight years. The market fell about 1 percent. The euro hardly fluctuated. /FRX

With inflation in the eurozone at a record-high 8.1% and expanding rapidly, the ECB has already signaled various actions, including the conclusion of its long-running asset purchase program at the end of this month. However, details will be essential.

John Hardy, the head of FX strategy at Saxo Bank, remarked that recent comments from key ECB policymakers had set a high bar for next month's rate hikes, which might be as much as 0.5 percentage points.

"So the question is A) will they clear that bar, and B) how will the market react? I do not believe the ECB will wish to remove any options from consideration."

Losses in European equities were widespread and headed by the mining sector (.SXPP), while the energy sector (.SXEP) was the only gainer, rising 0.4 percent as oil prices held over an eye-popping $120 per barrel despite China's implementation of new COVID lockdown measures in Shanghai.

Overnight, Asian stocks fell, and Wall Street futures were flat. However, this was primarily due to the resumed rise in global bond yields and the dollar, ultimately resulting in tighter financial conditions.

MSCI's broadest index of Asia-Pacific equities outside Japan was closing 0.65% lower, with Australian shares falling 1.2% and Seoul's KOSPI falling 0.5%. Hong Kong's Hang Seng reversed slight gains to decline 0.75 percent, while Chinese A-shares dropped 1 percent.

Matt Simpson, senior market analyst at City Index in Sydney, referred to the 11:45 GMT and 12:30 GMT ECB announcement and news conference as "It's classic pre-central-bank-meeting price action,"

"It's the most exciting meeting since (Christine Lagarde) has been at the helm, since Draghi was here - 'whatever it takes'."

Yen Lows

The second significant focus of global investors was the weakening Japanese yen, which fell to a 20-year low of 134.56 per dollar before recovering some ground. It is also approaching levels against the Chinese yuan, which is critical for Asia.

The Japanese yen has been pushed down by a widening policy divergence since the Bank of Japan is one of the few global central banks that are not now signaling an increase in interest rates.

The global dollar index, up over 7 percent this year, was unchanged at 102.51, and the euro was unchanged at $1.0719 and tested 1.05 against the neighboring Swiss franc before the ECB meeting.

The U.S. 10-year yield rose to 3.0344 percent on Thursday from 3.029 percent on Wednesday, while the two-year yield rose to 2.7887 percent from 2.774 percent.

According to newly released data, the eurozone economy grew significantly quicker in the first quarter than in the previous three months despite the Ukraine crisis.

As markets speculate on the magnitude and speed of ECB tightening, they are also expecting Friday's U.S. consumer price data, which the White House anticipates to be "elevated" According to a Reuters poll, economists predict yearly inflation of 8.3 percent.

Wednesday saw losses of 0.81 percent for the Dow Jones Industrial Average, 1.08 percent for the S&P 500, and 0.73 percent for the Nasdaq Composite.

"Over the last two weeks, trading has been in a very narrow range and also based on very low volumes," ING analysts wrote in a note.

"Previous instances of this range trading on low volumes have usually preceded a sharp down-shift," they cautioned, adding that the ECB meeting and Friday's U.S. price data were likely "catalysts for a more bearish outlook."