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OUTLOOK
  • Yesterday's FOMC meeting is now in the past and markets have priced in a less hawkish outlook for the Fed with terminal rate expectations around 2bp lower than they were at this time yesterday at just over 30bp, of which around 20bp are priced for the March meeting. Attention now turns to the BOE and ECB rate decisions this afternoon.
  • The BOE rate decision, statement and MPR are all due at 12:00GMT / 13:00CET with the press conference starting 30 minutes later. The MNI Markets team expects a 50bp hike at the February 2023 MPC meeting, but see around a 30% probability subjectively of a 25bp hike instead. Markets currently price around 44bp, around a 78% probability of a hike today. We think there is better risk-reward to position for a dovish outcome than for a hawkish move due to our expectations that there could be a more dovish vote split than the market expects. For the full BOE preview click here.
  • The ECB rate decision is due at 13:15GMT / 14:15CET with the press conference due to begin 30 minutes later. The ECB is set to hike policy rates by 50bp at the February meeting – a position that has now been well telegraphed and fully priced by the market There is unlikely to be any surprise policy innovation beyond some technical details on how QT will be implemented Markets will look for any clues on the March policy rate decision and we believe it more likely than not that Lagarde will hint at a similar sized hike at that meeting. For the full ECB preview click here.
  • It is also a chunky day for supply in the Eurozone with Spain and France holding auctions.
  • In the US, we will see weekly claims data, the final prints of December durable goods orders and factory orders data due today. The market will already have one eye on tomorrow's labour market report.
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