STIR: BOE STIRs Broadly Consolidating Yesterday's Dovish Repricing
Oct-23 07:12
SONIA-dated OIS have broadly consolidated yesterday’s dovish repricing, which came following the softer-than-expected September flash inflation reading (MNI review here).
- There is now a ~70% implied probability of a 25bp cut before year-end (vs ~40% pre-CPI), with just under 60bps of easing priced through September 2026 (up from just under 50bps at the start of this week).
- Amid the aforementioned rally in crude oil futures, SONIA futures are flat to -1.5 ticks through the blues. SFIZ6 was unable to test the May 1 high of 96.70 during yesterday’s rally, which faded a little into the close.
- The SFIZ5/H6 spread reached a cycle low of -32.5 ticks yesterday, but has since steepened back to -31.0 ticks at typing.
- CBI industrial trends data for October is due this morning.
- Meanwhile, BOE dove Dhingra is scheduled to speak at the Central Bank of Ireland’s ESCB Cluster 2 academic conference at 1400BST. Text will be released on the BOE’s website.
| Meeting Date | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| Nov-25 | 3.886 | -8.3 |
| Dec-25 | 3.798 | -17.0 |
| Feb-26 | 3.650 | -31.9 |
| Mar-26 | 3.589 | -38.0 |
| Apr-26 | 3.485 | -48.4 |
| Jun-26 | 3.451 | -51.8 |
| Jul-26 | 3.398 | -57.1 |
| Sep-26 | 3.380 | -58.9 |
| Source: MNI/Bloomberg Finance L.P |
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GILTS: Firmer On Wider Cues, Supply Provides Litmus Test For Long End Demand
Sep-23 07:09
Gilts a touch higher after Bunds & Tsys firm through early London trade.
- Ongoing weakness in crude oil helps provide support.
- Futures back towards yesterday’s high, topping out at 90.91.
- Initial support and resistance 90.60/91.11.
- Yields 1-2bp lower, curve flatter, last week’s lows in 2s10s and 5s30s remain untouched (closing lows are ~6bp away on both curves).
- UK flash PMI data is due today.
- It is also worth noting that the DMO will come to market with 30-Year gilts. Market participants will be watching the demand metrics closely after last week’s PSNB data revealed ongoing fiscal deterioration.
- On the fiscal front, the Resolution Foundation has suggested that Chancellor Reeves could raise ~GBP6bln by cutting employee national insurance contributions by 2ppt and raising the basic rate of income tax by the same amount. Note that this would only cover around 20% of the fiscal shortfall, but it would be a way of not increasing taxes on "working people" and might avoid some more painful taxes elsewhere that could hit growth harder or increase CPI.
- Elsewhere, BoE chief economist Pill will speak via a fireside chat on “Challenges of Monetary Policy in an Environment of High Fiscal and Geopolitical Uncertainty” (10:00 London).
AUDUSD TECHS: Corrective Cycle In Play
Sep-23 07:08
- RES 4: 0.6793 1.500 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 3: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 2: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 1: 0.6660/6707 High Sep 18 / 17
- PRICE: 0.6586 @ 08:07 BST Sep 23
- SUP 1: 0.6575/6547 Low Sep 22 / 50-day EMA
- SUP 2: 0.6527 61.8% retracement of the Aug 21 - Sep 17 bull leg
- SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
The AUDUSD uptrend remains intact and the latest pullback is considered corrective - for now. The recent rally plus the breach of 0.6625, the Jul 24 high and bull trigger, confirms a resumption of the uptrend. The climb opens the 0.6726 next, a Fibonacci projection. MA studies are in a bull-mode position highlighting a dominant uptrend. Key support to watch is 0.6415, the Aug 21 / 22 low. Initial firm support to watch is 0.6547, the 50-day EMA.
RIKSBANK: Rate Decision At 0830BST A Very Close Call Between Cut and Hold
Sep-23 07:06
The Riksbank decision is due at 0830BST/0930CET, with consensus split between a 25bp cut to 1.75% and a hold at 2.00%.
- MNI Preview here
- There are credible reasons to motivate either decision.
- We suspect the Board will be equally split (but don’t necessarily think that will be reflected in any formal dissents), with some members advocating for a form of insurance cut given a still-weak labour market and signs that the recent inflation uptick was temporary, and others preferring to wait for more data before determining if another cut is necessary.
- The September decision includes an updated MPR and rate path projection.
