March 22, 2023 09:27 GMT
UK inflation the driver this morning
- UK inflation has been the main story of the European morning session so far with services inflation jumping from 5.2%Y/Y in January to 5.6%Y/Y in February. In our BOE Preview yesterday we had said that for the three centrist members of the MPC (Bailey, Broadbent and Pill) if there was a rebound in services inflation that we expected them to vote for a hike this week - and the market moves have moved in line with this.
- SONIA futures were down over 30 ticks for the Sep23 and Dec23 contracts and are a little off their lows - with markets now pricing 24bp for this week's meeting (up from around 14bp at yesterday's close) with a cumulative 61bp priced by August (up from a peak of 36bp).
- Euribor futures pulled up to 8 ticks lower (23bp priced for May from 19bp yesterday with terminal 48bp higher from 44pb yesterday).
- SOFR futures actually higher on Fed day, with the Jun24 contract up 10 ticks. Markets pricing 21bp for today's meeting with a cumulative peak of 37bp at the May meeting (before the curve begins to invert).