Schnabel Deems Further Rate Hikes Unlikely, Light Support For Bunds & Downtick for EUR

German FI and Euribor futures draw support from a recently published interview with ECB Executive Board Member Schnabel. Bund futures break yesterday’s high on the move, while Euribor futures are 1.5-5.0bp firmer on the day through the blues. The EUR trades on the defensive as a result, although EUR/USD remains within the range that was already in play in Asia-Pac hours.

• Schnabel told RTRS that “the most recent inflation number has made a further rate increase rather unlikely.” This reads dovishly given her typically hawkish leanings.
• Still, she was generally cautious re: the timing of future policy steps, noting that “we have been surprised many times in both directions. So we should be careful in making statements about something that is going to happen in six months' time.”
• She also stressed that “we must not declare victory over inflation prematurely. We are on track but we need to remain vigilant."
• Elsewhere, Schnabel suggested that the ECB should keep a smaller balance sheet and have banks borrow from it when they need cash.