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STIR: 80% Implied Probability of October ECB Cut Ahead of German, Italian HICP

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German (state-level data 0900BST/1000CET; national 1300BST) and Italian (1000BST) flash inflation data headline today’s regional calendar, and markets may be sensitive to upside surprises following last week’s dovish repricing in EUR STIRs.

  • ECB-dated OIS continue to price 20bps of easing through the October meeting (i.e. ~80% implied probability of a 25bp cut).
  • There are 151bps of cuts priced through the June 2025 ECB meeting, implying 6x25bp cuts across the next 6 gatherings.
  • A reminder that French and Spanish flash HICP were both lower than expected on Friday, which prompted multiple sell-side names to call for an October ECB cut (a risk that had been heightened following the weak flash September PMIs earlier in the week).
  • The consensus for Tuesday’s Eurozone-wide flash inflation print is now 1.8% Y/Y, a little below the 1.9% expected as of last Thursday. Core inflation continues to be seen at 2.7% Y/Y.
  • Euribor futures are flat to +2.0 ticks through the blues.
  • ECB President Lagarde is scheduled to speak in EU Parliament at 1400BST today. Over the weekend, the dovish Stournaras told the FT that he sees a 25 cut in October as “reasonable”.
  • Portuguese and Irish inflation data is also due today. 

 

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German (state-level data 0900BST/1000CET; national 1300BST) and Italian (1000BST) flash inflation data headline today’s regional calendar, and markets may be sensitive to upside surprises following last week’s dovish repricing in EUR STIRs.

  • ECB-dated OIS continue to price 20bps of easing through the October meeting (i.e. ~80% implied probability of a 25bp cut).
  • There are 151bps of cuts priced through the June 2025 ECB meeting, implying 6x25bp cuts across the next 6 gatherings.
  • A reminder that French and Spanish flash HICP were both lower than expected on Friday, which prompted multiple sell-side names to call for an October ECB cut (a risk that had been heightened following the weak flash September PMIs earlier in the week).
  • The consensus for Tuesday’s Eurozone-wide flash inflation print is now 1.8% Y/Y, a little below the 1.9% expected as of last Thursday. Core inflation continues to be seen at 2.7% Y/Y.
  • Euribor futures are flat to +2.0 ticks through the blues.
  • ECB President Lagarde is scheduled to speak in EU Parliament at 1400BST today. Over the weekend, the dovish Stournaras told the FT that he sees a 25 cut in October as “reasonable”.
  • Portuguese and Irish inflation data is also due today. 

 

Keep reading...Show less