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Soft US Data Spurs Pullback In ECB And BoE Hike Pricing

BoE peak rate pricing pulled back sharply Tuesday after much weaker than expected US job openings and consumer confidence data, while conviction in a September ECB hike was dented ahead of key eurozone inflation data later this week.
  • BoE terminal Bank Rate pricing -6.7bp to 5.85% (60bp of further hikes left in the cycle to Feb 2023): BoE hike pricing pulled back to the lowest since Aug 11, with a 6bp drop from session highs after the weak US data. There's still a 25bp hike fully priced for the September MPC, with 45bp through the next two meetings cumulatively.
  • ECB terminal depo Rate pricing -0.2bp to 3.94% (19bp of further hikes left in the cycle to Dec 2023): ECB hike pricing has remained relatively steady today but notably September pricing went from about 50% implied probability of a hike to around 40% after the soft US data emerged. Of course, Euro area inflation data Weds and Thurs could well dictate whether the ECB hikes another 25bp in September or opts to pause. 16bp of hikes are cumulatively priced through the next 2 meetings.

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