/WEEKLY UPDATE: Euribor futures have........>

EURIBOR: /WEEKLY UPDATE: Euribor futures have rallied up to 5.5 basis points

this week. The majority of this move has occurred following Fed Chair Powell's

dovish speech which occurred close to the European close on Wednesday.

- The whites and, to a lesser extent, reds segment of the curve have also

steepened, with the H9 contract remaining largely unchanged. However, greens and

longer maturity contracts have seen more of a parallel shift.

- Indeed, the H9-H0 spread is at its tightest level in two years, but we still

think that there is scope for this spread to narrow yet further, particularly if

economic data in the Eurozone and the rest of the world continues to slow.

- Our ECB sources story last week revealed that at least some ECB sources are

debating whether to change the "balanced risks" language in the ECB statement.

- Optically, it would seem difficult for the ECB to normalise the deposit rate

while being increasingly concerned about downside risks.

- We think that expressing this view versus Eurodollar futures rather than

outright is more attractive.

- For charts see: http://marketnews-m.objects.xtenit.com/Euribor_-_301118.pdf