April 22, 2024 06:16 GMT
EUR STIRs Under Light Hawkish Pressure, Weekend ECB-Speak Doesn’t Alter The Outlook
STIR
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Euribor futures are lower to start the week, with Asia’s reaction to Friday’s core global FI moves, lack of weekend escalation in geopolitical tensions and U.S. fiscal support for Ukraine weighing.
- Contracts are flat to -2.5 through the blues, with the reds testing Friday’s lows, while the greens and blues have looked below Friday’s lows.
- ECB-dated OIS contracts also see a modest hawkish move, although familiar levels remain in play with ~21bp of cuts priced through the June meeting and a cumulative ~73bp of cuts priced through year end.
- Weekend ECB speak saw Wunsch (hawk) tell MNI that the Bank will likely cut interest rates at least twice this year (including in June), although he is wary of hawkish policy feedthrough from U.S. inflation.
- Elsewhere, Muller (hawk) pointed to further cuts after the initial move in June, although warned against loosening policy too quickly, playing down the need for 50bp steps.
- Villeroy (centrist/dovish) stressed that oil price uncertainty will not prevent a June cut, with a “pragmatic pace” of easing to follow.
- In sum, weekend ECB-speak continues to point to broad-based support for a June cut, although disagreement remains re: the suitable policy path beyond June (as we have covered in recent weeks).
- Comments from ECB President Lagarde and further appearances from Villeroy are due later today.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jun-24 | 3.699 | -21.1 |
Jul-24 | 3.580 | -33.0 |
Sep-24 | 3.415 | -49.5 |
Oct-24 | 3.320 | -59.0 |
Dec-24 | 3.176 | -73.4 |
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