Contrarian investors are betting against the consensus ahead of Thursday's European Central Bank meeting. While markets expect multiple rate increases, JPMorgan Asset Management argues that weak economic growth will limit the ECB to a single hike. Pictet Asset Management and Carmignac go further, suggesting policymakers might skip the increase entirely to avoid stifling a sluggish economy.

Market traders currently favor 75 basis points of increases by year-end, driven by inflation fears from the war in Iran. However, recent data shows the euro area's GDP fell in the first quarter, and the OECD warns of deteriorating sentiment with growth projected at just 0.8% this year. This economic fragility makes aggressive tightening risky for policymakers.

Fixed income managers are positioning their portfolios based on these diverging views. Some are adding duration by shifting into 10-year notes, while others bet against duration, expecting inflation to keep long-term yields high. The outcome depends largely on oil prices and whether a peace deal emerges to stabilize inflation expectations.

This divide creates a high-stakes environment for bond traders. If the ECB adopts a softer stance than priced in, front-end yields will likely drop, sparking a rally in short-dated government bonds.