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Weak PMIs Pull Down ECB / BoE Terminal Hike Pricing

STIR

ECB and BoE terminal hike pricing are set for their lowest closes in - respectively - 26 and 3 sessions, as weak European PMIs out Monday pointed to diminishing demand and price pressures.

  • ECB terminal depo Rate pricing -1.6bp to 3.96% (46bp of further hikes left in the cycle to Dec 2023). While a 25bp hike this Thursday is all but assured (over 96% implied), conviction for tightening beyond July is waning after today's weak PMIs, with peak pricing closing at the lowest levels since June 16th. 39bp is priced through September's meeting, suggesting little better than 55% odds of a follow-up 25bp hike.
  • BoE terminal Bank Rate pricing -4.1bp to 5.88% (88bp of further hikes left in the cycle to Feb 2024). Peak pricing remained below 6% for the 4th consecutive session, falling to the lowest close since last Wednesday. Aug MPC pricing sits at 35bp, suggesting around 40% probability of a 50bp as opposed to 25bp hike. 62bp is cumulatively priced through September.



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