EUROPEAN INFLATION: MNI Eurozone Inflation Insight – September 2024
The September Eurozone flash inflation round started with significant downside surprises from France and Spain. These prints were not only driven by lower energy prices but also softer core components, prompting a further dovish adjustment of market expectations towards an October ECB cut.
- Following Monday’s national-level releases, ECB President Lagarde also noted to the EU Parliament that the “latest developments [in inflation] strengthen our confidence that inflation will return to target in a timely manner” and that the ECB will “take that into account in [the] next monetary policy meeting in October.”
- Taken alongside a weak set of September flash PMIs, an October ECB cut is now 95% implied in meeting-dated OIS contracts, and the base case amongst almost all sell-side analysts we track.
- While country-level data from the likes of Germany and Italy did not generate a downward surprise as in France and Spain, the Eurozone-wide print nonetheless undershot the ECB’s Q3 core inflation projection by 10bps at 2.8% Y/Y. Headline inflation also came in soft, averaging 2.2% in Q3, below the ECB’s 2.3% projection.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
ECB: Spanish Government To Appoint Bank of Spain Governor On Sep 4
"SPAIN TO ANNOUNCE NEW CENTRAL BANK GOVERNOR SEPT. 4: EUROPA" bbg
- It was widely expected that the Spanish Government would appoint a new Governor to the Bank of Spain ahead of the ECB’s September 12 meeting.
- Before the July ECB meeting, PM Sanchez put forward Jos Luis Escriv – former head of the Monetary Policy Division at the ECB and current Digital Transformation Minister – for the job, but this was rejected by the opposition People’s Party.
- At the July ECB press conference, Vice President de Guindos noted that “the only thing that we recommend to all the governors is that they have to be knowledgeable, in terms of economics, finance, banking”.
- Previous Bank of Spain Governor Pablo Hernández de Cos’ term ended on June 11, 2024, and Deputy Governor Margarita Delgado Tejero has been acting head since.
GILTS: Just Above Lows, Little Respite For Bulls
Gilt futures hover above mid-morning lows, with little in the way of relief rallies noted across core global FI markets (detailed earlier).
- Data, IG supply and a move off lows in oil/equity markets have kept bears in control since the early sell off.
- Futures -53 at 98.17 vs. lows of 98.11.
- Initial round number support at 98.00, which protects the next level of Fibonacci support.
- Yields 1.5-4.0bp higher, 10s still lead the sell off, just.
- SONIA futures flat to -4.0, also off lows.
- BoE-dated OIS little changed from levels flagged mid-morning, A 25bp cut is fully discounted through the Nov MPC, with ~38.5bp of cuts priced through year end.
- Goldman Sachs suggest that “with spillovers from the U.S. still elevated, this week brings some short-term risks for the UK” front end, as we suggested earlier.
- They go on to stress that “given that inflation is back close to target and the pivot to growth is under way, the solid activity picture has increased our confidence in a 2-cut baseline for the BoE this year.”
| BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| Sep-24 | 4.909 | -4.1 |
| Nov-24 | 4.695 | -25.5 |
| Dec-24 | 4.565 | -38.5 |
| Feb-25 | 4.367 | -58.3 |
| Mar-25 | 4.232 | -71.8 |
| May-25 | 4.073 | -87.7 |
| Jun-25 | 3.980 | -97.0 |
EQUITY TECHS: E-MINI S&P: (U4) Bulls Still In The Driver’s Seat
- RES 4: 5821.25 1.00 proj of the Apr 19 - Jul 16 - Aug 5 price swing
- RES 3: 5800.00 Round number resistance
- RES 2: 5721.25 High Jul 16 and Key resistance
- RES 1: 5669.00 High Aug 26
- PRICE: 5658.00 @ 14:25 BST Sep 2
- SUP 1: 5561.25/5518.91 Low Aug 29 / 50-day EMA
- SUP 2: 5438.75/5319.50 Low Aug 14 / 9
- SUP 3: 5182.00 Low Aug 8
- SUP 4: 5120.00 Low Aug 5 and the bear trigger
A bullish theme S&P E-Minis remains intact and the contract is trading at its recent highs. A resumption of gains would pave the way for a climb towards key resistance and the bull trigger at 5721.25, the Jul 16 high. Clearance of this level would resume the primary uptrend. Support to watch lies at 5518.91, the 50-day EMA. A clear breach of it is required to instead highlight a potential bearish threat.
