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BoE Peak Pricing Jumps, ECB Nears 4.00% With Decisions Looming

STIR

A jump in BoE peak rate pricing stood out Wednesday, to the highest since Jul 18, with ECB expectations also pushing higher amid repositioning ahead of Thursday's decision.

  • ECB terminal depo Rate pricing +3.5bp to 3.98% (47bp of further hikes left in the cycle to Dec 2023). A 25bbp hike tomorrow is 96% priced, but September remains in the balance (37bp, at best a 50% prob of a consecutive 25bp raise), potentially swayed by the Governing Council's communications Thursday.
  • BoE terminal Bank Rate pricing +8.1bp to 5.97% (97bp of further hikes left in the cycle to Feb 2024) Peak pricing jumped the most since Jul 14, despite few evident news/macro catalysts. Even with analysts affirming/switching to a 25bp hike expectation for August (Deutsche Bank today said they now see a 25bps rise vs 50bps hike previously expected), pricing for the next meeting held firm, with just under 50% prob of a half-point hike (46%).

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