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ECB Pricing Fine-Tuning Ahead Of Decision, Tilt Towards No Move This Week Still Evident

STIR

Little net movement in ECB-dated OIS pricing to start the week, running flat to ~1bp firmer through the liquid area of the curve.

  • Any spill over from the hawkish BoJ musings has failed to meaningfully impact the strip, with participants continuing to fine-tune pricing ahead of Thursday’s ECB meeting.
  • That leaves ~10bp (~40% odds of a hike) priced for this week, while terminal deposit rate pricing sits ~19bp above current levels, with markets leaning more into the prospect of one further hike from the Bank in the current cycle
  • The BBG survey remains finely balanced, with 33/61 surveyed looking for no change in the deposit rate on Thursday.
  • The Bank is set to debate the trade off between still elevated (but slowing) inflation and a soft run of economic activity data.
  • Regional data has been lower tier to start the week, while the European Commission cut its GDP outlook for the Eurozone, alongside a mark lower for its ’23 CPI forecast and a related uptick in its ’24 inflation forecast.
ECB Meeting€STR ECB-Dated OIS (%)Difference Vs. Current Effective €STR Rate (bp)
Sep-233.756+10.3
Oct-233.818+16.5
Dec-233.841+18.8
Jan-243.829+17.6
Mar-243.781+12.8
Apr-243.711+5.8
Jun-243.612-4.1
Jul-243.502-15.1
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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