Fresh ’24 Highs For TTF Futures Further Complicates Inflation Moderation Narrative

Plenty of focus on the uptick in TTF natural gas prices, with the contract hitting a fresh ’24 high on increased supply risks.

• While the moves and outright price level in the contract pale in comparison when compared to the major swings and price peaks seen in the last 3 years, there is still some risk that the move higher could extend further.
• Any such move would further complicate the inflation moderation narrative, albeit with the ECB more concerned with sticky services inflation at this juncture.
• EUR STIRs have looked through the move at this stage, focusing on swings in broader risk sentiment.
• ECB-dated OIS continues to price a relatively aggressive easing cycle through the remainder of the year, with just under 75bp of cumulative cuts priced across the three remaining meetings of ’24.
• While EUR STIRs have pulled away from this week’s dovish extremes (~90bp of ’24 ECB cuts), current market pricing still looks aggressive when compared to the steer provided by several Governing Council members, which has tended to guide towards quarterly moves in benchmark rates.