EUROPEAN INFLATION: MNI Eurozone Inflation Preview - February 2025
Time For Some Progress On Services?
- The Eurozone February flash inflation round is spread across three days, with Spain kicking off proceedings on Thursday (Feb 27), before France, Italy and Germany report figures on Friday (Feb 28). Together, the four major economies should give a good read on price pressures ahead of the Eurozone-wide print on Monday (Mar 3).
- There is not yet a Bloomberg consensus for the Eurozone data, but analyst forecasts compiled by MNI point to a pullback in headline and core inflation to 2.3% (vs 2.5% prior) and 2.6% (vs 2.7% prior) respectively.
- The ECB’s confidence in the 2025 inflation outlook has been predicated on an easing of labour costs which should filter through into lower services inflation readings. In a recent hawkish interview with the FT, ECB Executive Board member Schnabel suggested services inflation “should start to come down in February”. However, analysts only expect a moderate deceleration to 3.8% Y/Y from 3.9% prior.
- The February flash inflation round shouldn’t impact market pricing for the ECB’s March 6 decision, with a 25bp fully priced well embedded into analyst (and presumably policymaker) consensus. However, a lack of progress on core metrics may still leave Q2 pricing vulnerable if hawks’ (led by Schnabel) bargain for a more cautious approach to future easing after a March cut.
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GLOBAL POLITICAL RISK: Week Ahead 27 Jan-2 Feb
MNI's Political Risk team has published its Week Ahead article looking at the major political risk events taking place globally over the coming seven days. Includes information on US President Donald Trump addressing GOP Representatives and the Senate continuing its confirmations process for cabinet picks; the EU unveiling its 'Competitiveness Compass'; and the UK Chancellor of the Exchequer speaking on the economy with a specific focus on planning reforms and how they might contribute to bolstering the UK growth outlook.
Full article PDF attached below:
BONDS: Off Highs As E-minis Stabilise
Broader risk-sentiment continues to dominate. Core global FI markets have ticked away from session highs as e-minis find a bit of a pre-market base over the last couple of hours.
- Speculation linked to Chinese firm DeepSeek’s AI advancements continues to dominate discussions (details on feedthrough for chip capex, efficacy of sanctions on China and risks to U.S. tech dominance all getting some airtime).
- The 7- to 10-Year zone leads the rally on the U.S., German & UK curves, with Tsys outperforming given perceived risks to U.S. tech.
- Yields on the Tsy curve are 8-11bp lower. 1.5-3.0bp off lows. Benchmarks out to 20s registered fresh ’25 lows during the London morning rally.
STIR: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (-0.01), volume: $2.289T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $912B
- Tri-Party General Collateral Rate (TGCR): 4.33% (-0.01), volume: $875B
- (rate, volume levels reflect prior session)
