STIR: ECB-dated OIS Sees Light Dovish Spillover From BoC Decision

The dovish-leaning BoC decision has spilled over a little into ECB-dated OIS, which now price 49.5bps of easing through the remainder of this year (99% implied probability of 2x25bp cuts). 

• Looking further out, there are 103bps of cuts priced through the ECB’s June 2025 meeting. 
• That’s broadly consistent with cuts at each of the four projection meetings until then (September, December, March, June), with a slightly higher probability of 2x25bp cuts in H1 2025 compared to H2 2024.
• Given the expected “bumpiness” in core inflation through the remainder of this year, the scope for material further dovish repricing (e.g. additionally pricing in a high chance of cuts at non-projection meetings) should be limited, absent a notable deterioration in growth prospects.
• However, markets will still be sensitive to next week’s risk events, namely the regional flash inflation round for July and the Fed/BoE/BoJ meetings.