BoE Peak Rate Expectations End Week 19bp Lower; ECB Unch

BoE peak pricing faded to a fresh 3-month low Friday, for a 19bp drop on the week, with ECB expectations largely unchanged today and for the week as a whole.

• BoE terminal Bank Rate pricing -4.0bp to 5.41% (16bp of further hikes left in the cycle to Feb 2024) There was little to impact BoE pricing Friday outside of flash September PMI data, with the implications of Thursday's rate hold continuing to reverberate. The MPC had the PMI data before its public release, so the impact of a weak reading was muted, but saw terminal pricing dip to session lows. Just 36% probability implied for a 25bp hike in November, flat on the day.
• ECB terminal depo Rate pricing +0.2bp to 4.06% (6bp of further hikes left in the cycle to Dec 2023). Mixed PMIs (weaker than expected French, stronger than expected German) had little impact on the implied hike cycle, which is very much anchored at a 4% terminal depo rate. There's still virtually no chance of an October hike (6-7% implied), with under 25% of a raise this cycle. Today, ECB's Lane underscored the idea that rates need to remain at 4% for a sufficiently long period but pointed to continued data dependence. Next week's eurozone inflation data will be closely eyed.