STIR: EUR Markets May Still BE Susceptible To Downside Core Inflation Surprises
Sep-29 07:10
- The September flash inflation round headlines this week’s Eurozone data calendar. Spanish core data came in a little softer-than-expected this morning. MNI’s full preview for the Eurozone-wide print will be released today.
- Markets have been paring back expectations of another ECB rate cut steadily since the September decision, where President Lagarde expressed confidence in the medium-term inflation outlook and noted that growth risks are now “more balanced”.
- However, with just under 10bps of easing priced through July 2026, markets may still be sensitive to a downside Eurozone core surprise. Some more dovish ECB officials continue to stress that inflation risks are tilted to the downside.
- In an interview with the FT this morning, Irish central bank governor Makhlouf said the ECB was “near the bottom” of its easing cycle. However, he still called for vigilance amid uncertainty around tariff policy impacts. These were Makhlouf’s first comments since the September decision. Overall, we’d say they are broadly in line with the Governing Council median.
- Euribor futures are +0.5 to +3.0 ticks through the blues, with the strip bull flattening alongside the German bond curve. There wasn’t much incremental impact from the Spanish data.
- ECB’s Nagel and Lane are scheduled to speak later today, with the ECB’s September sentiment survey also due.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Oct-25 | 1.925 | -0.1 |
| Dec-25 | 1.903 | -2.3 |
| Feb-26 | 1.891 | -3.5 |
| Mar-26 | 1.854 | -7.2 |
| Apr-26 | 1.849 | -7.7 |
| Jun-26 | 1.835 | -9.1 |
| Jul-26 | 1.835 | -9.1 |
| Sep-26 | 1.846 | -8.1 |
| Source: MNI/Bloomberg Finance L.P. | ||
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
RATINGS: S&P Upgrades Portugal To A+ From A
Aug-29 20:28
S&P has upgraded Portugal's long-term credit rating to A+ from A, with a stable outlook (had been positive).
- This is the 7th S&P upgrade for Portugal, from a low of BB in 2012-15. Only four ratings are higher (AA-, AA, AA+, AAA). This is the same rating as Slovakia, and just above Spain (A) per S&P.
- Per Bloomberg: "*S&PGR UPGRADES PORTUGAL TO 'A+' ON LOWER DEBT; OUTLOOK STABLE"
STIR: Still Eyeing September And December Cuts
Aug-29 20:16
With few market-moving data points this week, implied Fed rate cuts essentially held onto their post-Jackson Hole upward repricing, adding a couple of basis points of easing for good measure heading into the Labor day weekend.
- Indeed, the lack of movement is somewhat remarkable given this week's extraordinary "firing" of Fed Governor Cook, which is currently being fought out in the courts. In all it probably added to the dovish tone on the near-term rate outlook post-Jackson Hole but not substantially so, at least so far.
- The current path sees a September rate cut priced with nearly 90% implied probability, with 56bp of cuts through end-year (a cumulatively priced second cut in December) and 83bp through March 2026 (3+ cuts).
MACRO ANALYSIS: MNI US Macro Weekly: One Week, Two Labor Days
Aug-29 20:10
We've just published our latest US Macro Weekly - Download Full Report Here
- A busy pre-holiday week for data brought mixed economic signals and little net change in Fed easing expectations, putting next week’s labor day – Friday with its nonfarm payrolls report, of course, with apologies to Monday’s federal holiday – in focus for the FOMC and market participants alike.
- Second-quarter GDP was revised up by more than expected in the second reading, to 3.3% Q/Q SAAR, driven by better-than-previously estimated domestic demand but still leaving 1st half growth in slightly weaker territory vs last year. That said, the Atlanta Fed's Q3 GDPNow estimate jumped to 3.47% (though the implied contribution from net exports in the quarter looks somewhat dubious, as we explain).
- The other major release of the week was July's Personal Income and Outlays report, which showed a modest uptick in income and spending on the month. However, the broader trends remain mixed at best, as real disposable income growth remains soft and services consumption is failing to regain traction.
- Core PCE inflation was close to expectations in July as the Y/Y accelerated to 2.9% for its fastest since February as it moves further away from recent lows of 2.6% having stalled above the 2% target. Recent trend rates are a little hotter but the median FOMC member will still need to see a further acceleration to meet their 4Q25 forecasts from June.
- Labor data were mixed. Latest jobless claims were in line to slightly better than expected, with initial claims trending a little higher but still impressively low whilst continuing claims are broadly plateauing after sharper increases in 1H25. But within the Conference Board consumer survey, the labor differential edged lower again, suggesting a continued upward trend in the unemployment rate.
- Elsewhere: regional Fed activity surveys were individually mixed, but combined generally showed an improvement in both manufacturing and services activity albeit with continued upside price pressures.
- Consumer sentiment (UMichigan and Conference Board surveys) and housing activity remained soft.
- Apart from Gov Waller again making the case from rate cuts, other FOMC colleagues who commented this week were a little more guarded when it came to the need for easing, to our ear.
