de Guindos Helps ECB Pricing Marginally Higher, Sep Hike Remains Less Than 50% Priced

ECB-dated OIS runs little changed to a couple of bp higher on the session, with most looking to late Thursday comments from Vice President de Guindos.

• He stressed the Bank’s data-dependent stance, meaning that the debate surrounding the September decision is still open, while noting that the Bank is in the final stretch re: interest rate hikes.
• He also flagged that data signal weaker economic activity in Q3 and maybe Q4, although he suggested that the Bank's updated inflationary forecasts will not look too different to the existing ones.
• While the comments themselves were not overtly hawkish, the fact that de Guindos has dovish historical leanings, coupled with the move lower in pricing yesterday, seems to have put a light bid into the space this morning.
• 8.5bp of tightening is now showing for next month’s meeting, with terminal deposit rate pricing back above 3.90%.
• Recent comments from Governing Council member Villeroy once again stressed the need to return inflation back to target. He also noted that options are open re: the Bank’s September meeting, while highlighting the need for rates to be kept high enough for long enough. He also pushed back against any idea of rate cuts in the near-term