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STIR: 90% Implied Probability of October ECB Cut, Kazaks Warns On Market Pricing

STIR
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Euribor futures are flat to -1.5 ticks through the blues, but continue to price an aggressive ECB easing cycle over the next 2/3 years. ERZ6 trades at 98.100 (i.e. an implied rate of below 2%).

  • Although ECB’s Kazaks suggested an October cut was likely last night, he still cautioned that market implied easing expectations appeared too aggressive.
  • Weak flash PMIs, soft flash inflation data and dovish commentary from ECB President Lagarde have driven markets and analysts to favour a cut at the October 17 meeting.
  • ECB-dated OIS show a ~90% implied probability of an October cut, up from just 20% last Monday.
  • OIS price 152bps of easing through the June 2025 meeting (i.e. more than fully pricing 6x25bp cuts across the next 6 meetings).
  • Today’s regional data calendar is light, but ECB-speak is due from de Guindos, Kazaks, Lane, Elderson and Schnabel. 

 

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Euribor futures are flat to -1.5 ticks through the blues, but continue to price an aggressive ECB easing cycle over the next 2/3 years. ERZ6 trades at 98.100 (i.e. an implied rate of below 2%).

  • Although ECB’s Kazaks suggested an October cut was likely last night, he still cautioned that market implied easing expectations appeared too aggressive.
  • Weak flash PMIs, soft flash inflation data and dovish commentary from ECB President Lagarde have driven markets and analysts to favour a cut at the October 17 meeting.
  • ECB-dated OIS show a ~90% implied probability of an October cut, up from just 20% last Monday.
  • OIS price 152bps of easing through the June 2025 meeting (i.e. more than fully pricing 6x25bp cuts across the next 6 meetings).
  • Today’s regional data calendar is light, but ECB-speak is due from de Guindos, Kazaks, Lane, Elderson and Schnabel. 

 

Keep reading...Show less