HUNGARY: NBH Gov to Speak on Market Regulation, Cabinet Minister Holds Presser

GBP STIRs are essentially flat to incrementally less hawkish as core global FI markets tick away from Friday lows.

• SONIA futures flat to -1.0, with SFIZ5 and SFIZ6 piercing prior August lows late last week.
• BoE-dated OIS shows 8bp of easing through November, 13.5bp through year-end and 24bp through February.
• This comes after the recent hawkish adjustment stemming from domestic data and broader weakness in core global FI markets.
• Wednesday’s CPI data headlines the domestic calendar this week.
• A firm inflation print would see cut expectations pared back further.
• The BoE projected July headline CPI at 3.76% Y/Y in the August MPR (vs 3.58% in June), while the Bloomberg survey consensus currently stands at 3.7% Y/Y.
• Markets will continue to be sensitive to the core (consensus 3.7% Y/Y vs 3.66% prior) and services (consensus 4.8% Y/Y, BOE Aug MPR 4.88% Y/Y, vs 4.73% prior) readings, but there will also be a lot of focus on the non-core components, especially food.
• The August MPR contained a whole box on how food prices have impacted inflation expectations since 2022. The Bank expects food and non-alcoholic beverages inflation to accelerate to 4.74% Y/Y in July (vs 4.50% prior).
• More broadly, there wasn’t much in the way of concrete process at the Trump-Putin summit, with Trump set to meet with his Ukrainian counterpart later today.

• Aside from the NZD (up 0.22%) and the AUD (up 0.11%), the rest of the G10 Currencies are closer to flat against the Dollar, the Yen is the worst performer, albeit by a small 0.16%.
• Overall, all the G10 FX ranges have been fairly contained, even the volatile USDJPY is only trading in 53 pips range.
• The main focus for the Yen this Week is on Friday's Japan CPI.
• The Pound exchanges hand in a tight 26 pips range and Market Participants will have their eyes on the UK Inflation print due on Wednesday.
• Focus this Week is on UK, Japan CPIs, Prelim services PMIs, but ALL EYES are on Powell's speech Friday.

This week’s regional calendar is headlined by the August flash PMIs (Thursday). The ECB-dated OIS implied probability of a September cut is less than 5%, and only a much weaker-than-expected set of flash PMI readings (alongside a downward inflation surprise at the end of the month) could put a cut back on the table. Such an outcome appears unlikely. The composite PMI has been slowly trending higher since November 2024, with the April/May tariff-induced uncertainty only having a temporary negative impact on momentum.  

• EUR STIRs are little changed from Friday’s closing levels. The 1y ESTR swap rate is currently 1.84%, still below the pre-Liberation Day level of 1.99% but above the 1.72% seen prior to the June ECB decision. The 1y1y forward rate has seen a more notable hawkish move since early June. The chart below shows markets gradually accepting that the easing cycle is close to (or at) its close.
• Outgoing ECB Governing Councillor Holzmann called for more transparency on decisions in an interview with Bloomberg, including expressing support for a Fed-style dot plot. It’s worth noting that such an idea has been rejected by the likes of Chief Economist Lane and Bundesbank President Nagel in recent months.
• ECB Q3 Negotiated Wages are also due this week (Friday). However, the relative importance of this reading has declined in recent quarters since the ECB started publishing its forward-looking wage tracker.