POWER:  Italy’s PUN Index to Fall on Strong Renewables

Weakness further out the curve has promoted modest hawkish repricing in the front end of the EUR rates space (early focus this week falls on incoming EUR supply and political risk in France).

• Euribor futures are flat to -3.5, steepening. August lows are untested across the strip
• ECB-dated OIS shows little changed to 1bp less dovish but still leans towards 1 further cut in the cycle, pricing ~17bp of easing through June.
• ECB President Lagarde has reaffirmed the Bank’s ongoing monitoring of EGB spreads, along with the need for fiscal discipline and stressing that the toppling of any Eurozone government presents worry for the Bank. She also stressed that the Bank’s inflation target has been met, while pushing the need for swifter European reforms and highlighting a reduction in economic uncertainty.
• Elsewhere, acting Slovenian central bank Governor Dolenc suggested that the ECB is probably done with rate cuts in the current cycle.
• Meanwhile, Governing Council member Rehn said there is "no room for complacency", while tipping his hat to downside risks to inflation.
• Manufacturing PMI data headlines the Eurozone calendar today. While they are final readings for the larger economies (and Eurozone on the whole), it is worth noting that Spain’s reading was firmer than expected.
• Note that ECB’s Schnabel & Cipollone with chair panels at the ECB legal conference today, with Lagarde set to speak at that event this evening.

• MNI: SPAIN AUG MANUF PMI 54.3 (52.1 FCAST, 51.9 JUL)

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