The ECB's Insurance Hike

Taking another nibble on ERZ6

Speaking late last week, ECB President Lagarde said “we are between the baseline and the adverse” when referring to scenarios for the Iran war.

Euribor futures reflect this view, with the extreme lows having been bought in ERZ6 in recent weeks, but with no meaningful move back to pre-conflict February levels.

After revising our view in UnSTIRtain Times exactly a month ago, we continue to hold that the ECB will hike once this year, with the emerging dynamics increasingly supportive of this view.

Yet based on current ERZ6 pricing, there’s still a trade to be exploited.