GERMAN DATA: Jul Flash PMI: 36-month High For Manufacturing PMI

ECB-dated OIS are up to 1bp more dovish through the next 12 months, with crude oil/natural gas futures pulling back sharply following the ceasefire agreement between Iran and Israel (although, latest headlines surrounding a fresh Iranian strike on Israel suggest this agreement may be fragile). The 1-year EUR inflation swap is down 23bps today, with 5y5y rates also down 3bps. 

• Throughout the Middle East escalation, the outlook for one more 25bp ECB cut has been broadly intact, OIS now price a 95% implied probability of such a move rather than an 80% probability last Thursday.
• Euribor futures are +2.5 to -1.5 ticks through the blues, with the front of the strip outperforming. The reds, greens and blues may be sensitive to the details of today’s German budget (see earlier posts for more details).
• ECB’s Villeroy told the FT that another cut in the next 6 months was possible, and that the “neutral rate and a terminal rate are by nature different animals. They can be the same but they are not identical”. This dovish bias is consistent with his comments on June 19.
• The German June IFO survey is due at 0900BST today. A reminder that the flash PMIs were stronger than expected yesterday.
• Meanwhile, several ECB speakers (de Guindos, Kazimir, Lagarde and Lane) are scheduled to speak.

“*IDF: IDENTIFIED MISSILES LAUNCHED FROM IRAN TOWARD ISRAEL” - BBG

Bund Block trade, suggest seller:

• RXU5 ~4.1k at 130.98.