STIR: BoE Pricing Steadies, Showing Less Than 50bp Cuts through Dec

BoE-dated OIS little changed to incrementally more hawkish on the day, with macro inputs detailed elsewhere countering the early dovish move that followed the domestic retail sales data.

• 19bp showing through Aug, 25bp through Sep, 40bp through November and 47bp through year-end.
• SONIA futures are +0.5 to -3.5, twist steepening, countering some of the flattening seen earlier in the week.
• Spillover from the escalation in the Iran-Israel conflict was front and centre this week, with related inflationary risks flattening major global STIR curves.
• UK labour market data was on the softer side ahead of the BoE decision,
• The latter saw Bank Rate left unchanged, as was unanimously expected, although there was a slight dovish surprise via the 6-3 vote split (consensus only looked 2 dovish dissenters), although this and the source of the dissenting vote (Deputy Governor Ramsden) were within the range of viable outcomes outlined ahead of the decision.
• All in all, the decision seems to set up another August cut and reinforces a quarterly cutting pace with future labour market data releases likely to rise in prominence.
• This morning’s retail sales data was soft but won’t be enough to influence the BoE’s thinking, at least in isolation.
• Note there were some cautious undertones in the accompanying ONS release, a more elongated run of soft retail sales releases would provide a dovish input, at least at the margin.
• Flash PMI and BoE speak are set to headline the UK calendar next week