Off their lows but PMIs still put under pressuire

STIR futures are under pressure globally following the PMI data released this morning (but are off their lows).

• The short sterling strip is now the biggest mover of the day (the Euribor strip had seen bigger moves in Greens and Blues earlier today). The UK PMI data pointed to more strength in output as well as high employment, rising wages and high inflation. Later comments from BOE's Haskel were not particularly hawkish (but he is among the most dovish on the MPC so were not a surprise). He seemed fairly non-committal as to when a hike would be. A hike next month is now only around 2/3 priced in but markets continue to look for rates around 1.25% by the end of 2022.
• The Euribor strip has steepened in from around the Jun-23 contract onwards, down 6 ticks at the Jun-25 contract. Although the headline numbers were higher than consensus, the expectations components of the Eurozone PMIs were a lot more downbeat, so it makes sense we have moved a couple of ticks off the lows seen earlier. A first 10bp hike remains priced in Q4-22.
• The Eurodollar strip continues to digest Powell's reappointment and has reversed much of the moves seen around the time of this morning's European data. A hike remains priced in H1-22 with further hikes in Q3 and Q4.
• Both the Euribor and Eurodollar strips moves off the lows seem to have coincided with some deteriorating Covid-19 case data, particularly across the Eurozone.