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

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.