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Hawkish adjustments in ECB pricing extend a little further, but near-term market pricing of cuts remains more aggressive than the once-per-quarter preference held by at least several GC members.
- What’s more, President Lagarde didn’t seem in a particular rush to cut rates again, exhibiting little worry when it came to downside risks to the Bank’s central GDP growth scenario.
- Elsewhere, some of Lagarde's comments on wages could be read as hawkish.
- ECB-dated OIS prices around 3.5x 25bp cuts over the next 4 meetings, with ~5bp of cuts priced for the October meeting.
- That compares to ~8bp cuts for October and ~91bp through March running into today's decision (based on the assumption that today’s cut would be delivered).
- The Eurozone would probably have to experience a deeper slowdown in growth than the ECB currently envisages to match market pricing over the next few meetings.
- Over on the Euribor strip, ERZ4/Z5 is 2bp off yesterday’s cycle lows, last -111bp, while ERH5/H6 support (at the July lows) remains intact.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Cut-Adjusted Effective €STR Rate (bp) |
Oct-24 | 3.363 | -5.2 |
Dec-24 | 3.085 | -32.9 |
Jan-25 | 2.864 | -55.0 |
Mar-25 | 2.552 | -86.2 |
Apr-25 | 2.326 | -108.8 |
Jun-25 | 2.108 | -130.7 |
Jul-25 | 2.011 | -140.3 |
Fig. 1: Euribor Z4/Z5 & H6/H6 Spreads
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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