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STIR
After trading in a wide range this week (126-147bp), ECB terminal hike pricing finished where it began, with 142bp of tightening expected through July.
- The low was posted following a Bloomberg sources piece Tuesday suggesting ECB officials were eyeing a downshift from a 50bp Feb hike to a 25bp Mar hike. But pricing reversed higher in the coming days as a parade of ECB speakers (including Knot, Villeroy, Lagarde) pushed back, reiterating the December meeting guidance.
- Feb hike pricing continues to point to a 95% probability of a 50bp (vs 25bp) hike.
BoE 2023 hike pricing meanwhile ticked up this week by 4bp to 103bp (by the Aug MPC), in a slightly narrower weekly range than ECB terminal pricing moved (13bp, vs for 21bp)
- An above-expected CPI print offset other weak data (incl retail sales) and some commentary by BOE's Bailey (on inflation set to fall rapidly this year) that led to knee-jerk but not lasting dovish repricing.
- Indeed the CPI print helped nudge pricing a little more toward a 50bp hike in Feb (now 84% priced, vs 80% at last week's close).
Jul'23 Implied ECB Cumulative Hikes, bpSource: BBG
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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