ECB Pricing A Little Firmer Today, Familiar Parameters Remain In Play

Firmer retail sales data out of the U.S. and the general direction of travel for core global FI markets has biased ECB-dated OIS firmer on Tuesday.

• That leaves the liquid contracts running little changed to 4bp firmer on the session, with the strip steepening.
• Still, pricing parameters remain in familiar territory, with only 2.5bp of additional tightening priced into the current cycle, while the first 25bp cut is more than fully priced come the end of the ECB’s July ’24 meeting.
• Late Monday saw the usually dovish ECB chief economist Lane fail to take the prospect of further rate hikes off the table as he stressed that the Bank must be open to doing more if additional shocks become apparent. Lane also underscored the need for rates to be high for as long as is necessary, with a particular focus on wage negotiations. This wouldn't have harmed today's hawkish move in pricing.
• Elsewhere, late Monday also saw BBG sources report that ECB President Lagarde told Eurozone Finance Ministers that “the European Central Bank is watching the oil price for any inflationary impact from the Israel-Hamas conflict.”
• Looking ahead, today’s ECB speak should provide the final rounds of scheduled monetary policy-related comments ahead of next week’s policy decision.