ECB Pricing A Little Steeper Still, Looking Through Source Reports

ECB-dated OIS continues to hover a little above neutral levels, with the liquid contracts 0.5-3.0bp firmer and the steepening impetus holding.

• Just under 10bp of tightening remains priced for the Bank’s September meeting, while terminal deposit rate pricing shows a little above 3.90%.
• The comments from hawkish ECB Governing Council members Nagel & Vujcic, made in Asia-Pac hours, coupled with some weakness in core regional FI markets has left the bias in ECB pricing geared a touch higher for most of the day.
• Sources pieces from both ourselves and RTRS pointed to the growing likelihood of a ‘hawkish hold’ at next month’s meeting, but did little to move market pricing on a meaningful basis, given the Bank's well-known data-dependent stance.
• The recent run of data is deemed enough to stop the Bank from deploying another rate hike next month, at least according to the bulk of the contributing sources.
• That excludes any meaningful surprises in Eurozone CPI data due next week.
• That datapoint and the Bank’s updated economic forecasts will provide key inputs for the September decision.