STIR: Benign PMIs and Sep Inflation Could Pull October ECB Pricing Down Further

* ECB-dated OIS now price 12bps of hikes through October, down from 13bps yesterday and 16bps at last Friday's close. While the September ECB decision clearly opened the door to further hikes, the tone of some recent Executive Board commentary seems to have pushed back on the case for sequential moves. October pricing could thus fade further assuming today's flash PMIs and next week's Eurozone September flash inflation readings don't contain material hawkish surprises. * Consensus expects the Eurozone-wide September flash composite PMI to remain expansionary at 51.7 (vs 52.0 prior). The German composite is seen at 51.8 (unch vs prior), while France is expected to remain in contractionary territory (48.7 vs 48.5 prior), amid ongoing domestic political uncertainty. * Further out, OIS still price almost 80bps of hikes priced through the middle of next year. Yesterday evening, the hawkish Nagel didn't rule out a move into "mild restrictive territory" - consistent with comments on September 11. ------------------------------------------------------------------------------- Meeting Date ESTR ECB-Dated OIS (%) Difference Vs. Current Effective ESTR Rate (bp) Oct-26 2.562 12.2 Dec-26 2.788