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Pricing Fewer ECB / BoE Cuts Amid Global Rate Rout

STIR

ECB terminal hike pricing actually took a small step back amid a broader global rate rout Thursday, while BoE pricing ticked up to at one point fully price in another hike in this cycle.

  • ECB: Pricing for an October ECB hike moved from slim to none after softer-than-expected German and Spanish inflation data, ahead of Friday's Eurozone-wide release. There's just under 5bp of a hike priced for the rest of the cycle to a 4.05% depo rate in December 2023, about 0.2bp below Wednesday's close.
  • Markets see 53bp in ECB cuts in the year following the December peak - that's 7.5bp less than seen yesterday.
  • BoE: A 25bp November BoE hike meanwhile was 50% priced by the peak of the global bond sell-off in mid-afternoon Europe time, before fading to around 44% - still up 4% on the day. Peak Bank Rate pricing (for Feb-Mar 2024) had eclipsed 5.52% meanwhile at that point before settling at 5.48%.
  • Markets are pricing in 63bp of cuts in the year after the BoE peak, around 11bp less than priced yesterday.
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