Markets Look For 'Hawkish' ECB Cut, 65bp Of '24 Cuts Priced

Euribor futures hold a little lower on the day as we move towards the ECB decision, last 0.5-4.5bp below yesterday's settlement levels.

• Expectations for a ‘hawkish’ cut (very modest odds of back-to-back rate cuts in June & July priced at this stage), an uptick in equity markets and recovery from multi-month lows in crude oil are likely factoring into the downtick.
• ECB-dated OIS show ~24.5bp of cuts for today’s meeting, with a further ~20bp of cuts priced through the Sep meeting (80% odds of a follow up cut priced over that horizon).
• Meanwhile, ~65bp of cuts are priced through year end, reflecting slightly better-than-even odds of 3x 25bp rate cuts in ’24.
• The rough run of ECB pricing places particular focus on the potential for cuts at the meetings that are accompanied by economic forecast updates.
• A reminder that the recent move away from ’24 hawkish extremes in ECB pricing comes alongside a general move lower in core global bond yields and some dovish repricing of the market-implied Fed rate path, aided by U.S. data.

Source: MNI/Bloomberg. 2025 dates are estimated.