STIR: Euribor Futures Weaker But Focus Remains On US NFP

Euribor futures are flat to -2.0 through the blues, after the uptick following the weaker-than-expected German IP reading faded.

• Apparent ERM4/U4 spread activity (via outrights) elevates volumes in those two contracts.
• ECB-dated OIS price just 1bp of easing through the July meeting, after the ECB’s upward revision to its inflation projections prompted a hawkish reaction on Thursday.
• There are ~35bps of cuts priced through the remainder of 2024.
• Several hawkish ECB speakers (Kazaks, Muller, Nagel and Vasle) have stressed that the ECB is not pre-committing to a particular rate path.
• We expect similar rhetoric from the remainder of today’s scheduled speakers (Nagel again, Simkus, Holzmann, Schnabel, Centeno and Lagarde). Holzmann will attract additional attention, as he was the sole dissenter at yesterday’s decision.
• Markets remain focused on today’s US labour market report, though the final Eurozone Q1 national accounts data should also warrant some attention.
• The latter data will contain information on the GDP deflator and its components, metrics followed closely by the ECB (particularly compensation per employee).
• For reference, yesterday’s updated ECB projections saw an upward revision to GDP deflator growth through 2024, with unit labour cost and unit profit growth expectations revised higher.