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STIR: BoE Pricing Steadies At Just Over 50bp Of Cuts
Light hawkish adjustments in GBP STIRs this morning, but contracts are still at meaningfully more dovish levels than what was seen ahead of Friday’s U.S. data.
- A downtick in Tsys (perhaps linked to suggestions that U.S. President Trump can ultimately have little influence on the BLS data, despite the recent personnel changes, see our exclusive: Ex-Chief Says BLS Can Withstand Trump Pressure) seemingly factors into this morning’s price action.
- SONIA futures -0.5 to +1.5, strip twist flattens.
- BoE-dated OIS shows 23.5bp of easing for this week, 27bp through September. 43.5bp through November and 51.5bp through year-end.
- December pricing operates around the middle of the multi-week range (which has showed 44-58bp of cuts).
- The bulk of Friday's U.S. data-driven dovish repricing sticks.
- Anything other than a 25bp cut at Thursday's MPC decision would be a huge shock.
- Accompanying guidance is widely expected to be left unchanged with the "gradual", "restrictive" and "careful" buzzwords all likely to remain. The focus will therefore be on the updated inflation projections in the MPR as well as the vote split.
- Based on the 17 previews that we have read so far that have provided vote split expectations:
- The modal expectation is a 2-5-2 vote split (7/17).
- 11 expect two votes for 50bp cut, 3 expect one vote, 3 expect no votes for 50bp cut
- 2 expect three votes for on hold, 9 expect two votes on hold, 4 expect 1 vote on hold, 2 expect no votes for on hold.
- 2-4-3 (50-25-0) is the most split committee within an analyst's base case, 0-9-0 is also an analyst's base case.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 3.983 | -23.4 |
Sep-25 | 3.945 | -27.2 |
Nov-25 | 3.782 | -43.5 |
Dec-25 | 3.703 | -51.4 |
Feb-26 | 3.582 | -63.5 |
Mar-26 | 3.543 | -67.4 |
GBPUSD TECHS: Maintains A Softer Tone
- RES 4: 1.3681 High Jul 4
- RES 3: 1.3620 High Jul 10
- RES 2: 1.3448/1.3589 50-day EMA / High Jul 24
- RES 1: 1.3365 Low Jul 16
- PRICE: 1.3286 @ 07:49 BST Aug 4
- SUP 1: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
- SUP 2: 1.3041 Low Apr 14
- SUP 3: 1.3000 Round number support
- SUP 4: 1.2945 50.0% retracement of the Jan 13 - Jul 1 bull cycle
A bearish theme in GBPUSD remains intact for now - despite Friday’s rally. Last week’s sell-off resulted in a breach of the bear trigger at 1.3365, the Jul 16 low. The break confirms a resumption of the downleg that started Jul 1 and highlights a clear breach of the trendline drawn from the Jan 13 low. Sights are on 1.3144, a Fibonacci retracement, and 1.3041, the Apr 14 low. Firm resistance is 1.3448, the 50-day EMA. A break of this average is required to signal a reversal.
EURUSD TECHS: Corrective Cycle
- RES 4: 1.1851 High Sep 10 2021
- RES 3: 1.1829 High Jul 01 and the bull trigger
- RES 2: 1.1789 High Jul 24
- RES 1: 1.1617 20-day EMA
- PRICE: 1.1574 @ 07:48 BST Aug 4
- SUP 1: 1.1401 Low Jul 30 and a bear trigger
- SUP 2: 1.1373 Low Jun 10
- SUP 3: 1.1313 Low May 30
- SUP 4: 1.1184 38.2% retracement of the Feb 3 - Jul 1 bull cycle
Despite Friday's rally, EURUSD maintains a bearish tone. The recent breach of key support at the 50-day EMA, at 1.1548, highlights a stronger reversal and the start of a correction. This opens 1.1373 next, the Jun 10 low. Firm resistance is seen at 1.1617, the 20-day EMA, where a break is required to signal a reversal. Today’s gains highlight a key short-term support and bear trigger at 1.1401, Jul 30 low. A break would resume the downtrend.
