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US GDP leads to rally

STIR FUTURES
  • Eurodollar futures are up to 14 ticks higher on the day, largely driven by the weaker-than-expected US Q2 GDP print. Markets are now pricing 56bp priced for September, 82bp cumulatively by November and and 90bp by the March meeting. Therefore the curve inverts somewhat with a first 25bp cut fully priced by June 2023.
  • The Dec-23 Euribor contract has traded in a wide 27 tick range today, initially moving lower on German state CPI data, before recovering losses when later state CPI data was not as low and then being pulled higher by the weaker-than-expected US GDP print. The strip is now up to 14 ticks higher than yesterday's close with Whites and Reds seeing the biggest moves. Markets price 45bp for the September meeting, 76bp cumulatively by October and 999bp by year-end. The curve flattens from May 2023 onwards with a peak of around 112bp priced in.
  • The SONIA futures strip has also been pulled higher by the US data miss and is up to 16 ticks higher on the day - after also opening higher and catching up with last night's Fed moves. Markets now price 44bp for next week's meeting with a cumulative 87bp priced by September and 147bp by year-end, with 160bp priced by February 2023, with the curve inverting thereafter.
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