STIR: Final Q2 National Accounts May Help Shape ECB Guidance

Although this afternoon’s US labour market data will likely be the largest driver of intraday price action in EUR STIRs, the final Eurozone Q2 national accounts release contains important inputs for the ECB ahead of next Thursday’s meeting.

• The national accounts include data on compensation per employee and hours worked, both of which feed into unit labour cost growth.
• Eurosystem staff had forecasted compensation per employee at 5.1% Y/Y in Q2, which would be steady vs Q1. However, the soft Q2 negotiated wages data (to 3.6% vs 4.7% in Q1) means there are downside risks to this projection.
• The national accounts data will help shape the ECB’s guidance for the rest of this year. ECB-dated OIS currently price 63bps of easing through year-end, close to 50/50 pricing between two or three cuts across the three remaining meetings.
• Euribor futures are +0.5 to +3.5 ticks through the blues, aided by weaker-than-expected IP data from Germany and France this morning.
• The ECB have entered its pre-meeting quiet period, though any interviews conducted as of yesterday may still be published in advance of Thursday’s decision.