STIR: 50bp Of BoE Cuts Priced Through Dec After Labour Market Data
Modest hawkish adjustments in GBP STIRs following this morning’s labour market data.
- BoE-dated little changed to ~2bp less dovish through December, showing ~21bp of easing for next month, 25.5bp through September, 42bp through November and 50bp through year-end.
- SONIA futures flat to -3.0.
- We, the market and the MPC know to always take the payrolls print with a large handful of salt, but the size of the revisions seen today are even larger than usual and do change the narrative somewhat from a potentially large alarm bell ringing to a more gradual decline.
- All in all, we think there is still enough evidence for the MPC to vote for a 25bp cut in August, and probably still enough for quarterly cuts to continue thereafter, but these data do reduce the risk of sequential cuts soon (particularly with CPI a little higher yesterday).
- Please see our recent run of bullets for greater colour on the labour market data.
- Little of note on the UK calendar for the remainder of the day, which will leave focus on ongoing adjustment to the labour market data and broader macro inputs.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 4.005 | -21.3 |
Sep-25 | 3.963 | -25.5 |
Nov-25 | 3.801 | -41.7 |
Dec-25 | 3.717 | -50.0 |
Feb-26 | 3.590 | -62.7 |
Mar-26 | 3.560 | -65.7 |
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BOJ: Ueda: Downside Risks To Economy and Prices Larger Than Upside Risks
Ueda notes that too rapid a cut in bond purchases could risk destabilising the market, while outlining that the decision on bond tapering was based on market participant's opinions.
On rates, he re-iterated that the BOJ will continue raising rates if the economic outlook - which is not too different compared to the last MPM - is realised. The price trend is expected to be in line with the BOJ's target in the 2nd half of the outlook.
- He notes that there are upside and downside risks to the economy and inflation, but that downside risks are currently larger for both variables.
USD: AUD and NZD are the best early performers
- Overall the Dollar is flat against most G10s, the early interesting chart is still the AUDUSD, after the cross reached its best level since last November Yesterday.
- This level stands at 0.6552, and a clear follow through would open to 0.6582 High Nov 12 ‘24 and 0.6603 High Nov 11 ‘24.
- The Kiwi is the 2nd best early performer, and similar to the Aussie, the NZDUSD exchanged hands at its highest level since October Yesterday.
- Yesterday's printed high is at 0.6088, but it is most likely that Market Participants will be looking for the initial resistance circa 0.6106.
BOJ: Ueda Sticks To Policy Statement Script At Start of Presser
The BOJ press conference has started. Governor Ueda starts by discussing the decision on JGB purchases - all very much in line with the policy statement.
- A reminder that the BOJ announced that it would trim bond buying by ¥200bn/per quarter from April 2026 next year. The current pace had been at a reduction of ¥400bn per quarter. There was one dissenter to this decision, board member Tamura, who wanted to keep the pace around ¥400bn. He also argued that long term rates should be determined by the market.
- USDJPY is currently -0.1% lower on the session at 144.59.
