Euribor futures moved off lows alongside Bunds following the softer-than-expected US ISM services print, but remain -1.5 to -2.5 ticks through the blues versus yesterday's settlement. ECB-dated OIS continue to price less than a ~10% implied probability of a 50bp cut in December, with 156bps of easing priced through the end of 2025.

• There was little reaction to comments from ECB President Lagarde’s hearing before the EU Parliament, which steered clear of explicit policy signals.
• Lagarde did note that “we are in sight of [the inflation] target and that would predicate that we begin looking forward more than we have in the last couple of years”.
• This is a similar rhetoric to Chief Economist Lane’s interview with the FT on Monday: "Once we've got the backward-looking element done, the disinflation process completed, then I think monetary policy needs to be essentially forward- looking, and to be scanning the horizon for what are the new shocks that might lead to less or more inflation pressure".
• These remarks highlight that the ECB’s policy statement is likely to be tweaked over the coming quarters as rates continue to be lowered.
• Market focus remains on the extent of such a tweak at next week’s meeting, which also includes a revised set of macroeconomic projections.
• Meanwhile, Irish Central Bank Governor Makhlouf re-iterated his view that the bar to supporting a 50bp cut is high.