UK DATA: Stagflationary Signals In Jan Services PMI
Feb-05 09:35
Small downward revision to the UK January services PMI (50.8 vs 51.2 flash, 51.1 prior). The composite reading nonetheless ticked up to 50.6 (vs 50.9 flash, 50.4 prior). Overall, the services release screens as stagflationary, with wage-driven input cost increases being passed through to output charges, and the employment outlook remaining soft.
Key notes from the release:
- “Greater payroll costs meant that input price pressures continued to intensify at the start of 2025. The overall rate of cost inflation was the highest for nine months, which resulted in a robust and accelerated rise in average prices charged by service sector firms”.
- “While some service providers commented on the impact of global economic uncertainty and elevated interest rates, many firms also linked lower new orders to weaker business confidence in the wake of the Autumn Budget”
- “Export sales decreased for the second month running”… “Resilient demand from US clients was reportedly offset by lacklustre spending across Europe”.
- “The rate of job shedding accelerated to its fastest since January 2021. Anecdotal evidence suggested that rising payroll costs and lower margins had encouraged hiring freezes and a focus on boosting operational efficiency”
- MNI’s BOE preview is here.
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EUR: Single Currency Extends Bounce Following Eurozone/Germany Data
Jan-06 09:32
- Markets are continuing to pare ECB easing bets following the higher-than-expected data releases across the Eurozone PMIs and the German inflation print for Hesse. As such, the Euro is strengthening and is among the best performers in G10.
- Alongside the softer greenback, EURUSD has extended its appreciation above the prior breakout level of 1.0335, taking the pair to an intra-day high of 1.0369. Overall, the trend needle continues to point south, and initial firm resistance is at 1.0414, the 20-day EMA.
- EURJPY is standing out, rising 0.75% at typing amid the notable weakness for the Japanese Yen overnight. We have traded above the Jan 02 high while the focus will be on 165.04, the Nov 15 high and a key short-term resistance.
MNI: UK FINAL DEC SRVICES PMI 51.1 (FLASH 51.4); NOV 50.4
Jan-06 09:30
- MNI: UK FINAL DEC SRVICES PMI 51.1 (FLASH 51.4); NOV 50.4
STIR: 100bp Of ECB Cuts Priced For ’25 After Hesse CPI
Jan-06 09:26
Firmer-than-expected Hesse CPI data out of Germany (based on comparisons with the national CPI expectations) drives further hawkish repricing on the ECB-dated OIS strip, with 100bp of cuts now priced through ’25.
- This compares to 115-120bp seen just before the Christmas break.
- ~26bp and ~27bp of cuts show over the next two ECB decisions, respectively, as market-implied odds of an upsized rate cut are pared further.
- A reminder that methodology alterations and regional holidays means that Hesse provides the only major regional CPI release ahead of this afternoon’s German national CPI release.
| ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
| Jan-25 | 2.661 | -25.8 |
| Mar-25 | 2.393 | -52.6 |
| Apr-25 | 2.204 | -71.5 |
| Jun-25 | 2.080 | -84.0 |
| Jul-25 | 2.038 | -88.1 |
| Sep-25 | 1.971 | -94.8 |
| Oct-25 | 1.939 | -98.0 |
| Dec-25 | 1.919 | -100.0 |
- Euribor futures are 3.0-5.5bp lower at typing.
- ERZ5 8.0 off its November low and 11.0 off its October low.
- SOFR/Euribor and SONIA/Euribor Dec ’25 spreads continue to move away from their late ’24 highs.
Fig. 1: SOFR/Euribor and SONIA/Euribor December ’25 (Z5) Spreads
Source: MNI - Market News/Bloomberg
