STIR: Over 50bps of Further ECB Easing Priced Through ‘24

Euribor futures have recovered from overnight lows, with whites/reds 0.5 to 2.5 ticks higher and blues flat to -1.0 ticks lower. The surprise 20bps MLF cut from the PBoC overnight will have provided some support to the front-end of the strip.

• ECB-dated OIS now price just over 50bps of easing through the remainder of this year (i.e 2x25bp cuts are more than fully priced).
• There are 22bps of cuts priced for the next ECB meeting in September.
• Weakness in today’s IFO survey data may catalyse further dovish moves intraday, particularly given the ECB’s heightened sensitivity to weakening growth prospects at last week’s press conference.
• However, we think the bar to pricing in a chance of 3x25bp cuts this calendar year is quite high, given the ongoing persistence in services inflation. 
• Bundesbank’s Nagel gives a press conference at the G-20 summit at 1200BST, while ECB President Lagarde attends a summit on “Sport for Sustainable Development” (and is thus unlikely to be pertinent to ECB policy).