STIR: Dovish BoE Repricing Following CPI, Over 45bp Of Cuts Showing Through Dec
Softer-than-expected inflation data drives a dovish move in GBP STIRs, with modest undershoots vs. market and BoE expectations for both core and headline CPI.
- Meanwhile, services CPI topped market consensus but was below BoE expectations, while core goods inflation slowed notably - but this is largely due to clothing which should at least partially reverse in March.
- The slowing in the core goods component is of growing importance for the market, given the BoE’s apparent increased focus on the metric. But it's not a broad-based move and so we think the market is overreacting here.
- BoE-dated OIS 4-6bp more dovish across ’25 meetings.
- 18.5bp of cuts priced through May, 21bp through June, 30.5bp through August and 46bp through year-end.
- The strip discounted ~40bp of cuts through year-end at yesterday’s close.
- We still look for the next cut at the May MPC, inline with the sell-side consensus
- SONIA futures flat to +7.5.
- Focus for the remainder of the session is on the Spring Statement, with the potential for larger-than-expected spending cuts (via welfare and government departments) apparent, particularly in light of recent press reports pointing to such moves.
- That adds to the dovish impetus.
- Our full preview of that event is here.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.272 | -18.5 |
Jun-25 | 4.245 | -21.2 |
Aug-25 | 4.153 | -30.4 |
Sep-25 | 4.102 | -35.5 |
Nov-25 | 4.022 | -43.5 |
Dec-25 | 3.996 | -46.1 |
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USD: A negative start for the Dollar
- The Dollar is in the red going into the European session, the mains story overnight has been the German Election with Desks now seeing a CDU/CSU and SPD coalition as the most likely outcome.
- The EUR has been supported and has managed a test to 1.0500.
- The overnight high of 1.0528 was the best printed level since 27th January, and while some will look at 1.0533 High Jan 27 and a reversal trigger as the initial resistance, better is seen at the 1.0539 mark.
- The Yen is small worst performer, albeit by just 0.15%, and overall the Japanese Yen has gained 1002 pips versus the Dollar since the 10th January.
- Support in USDJPY will be at the overnight printed low of 148.85, followed by 148.65 Low Dec 3 ‘24 and a key support.
SWEDEN: Tepid Q4 Housing Starts and Completions, But Better Outlook Ahead
Preliminary Q4 residential construction data suggests housing starts and completions growth remains tepid. However, a rebound in residential gross fixed capital investment and relevant sentiment indices suggests a more positive outlook ahead for the sector, as Riksbank rate cuts feed through into the real economy.
- Swedish housing starts rose by 1,300 in the fourth quarter, with 4,600 multi-dwelling (i.e. apartment) starts and 1,360 one- or two-dwelling building starts. Across 2024 overall, there were 25,770 starts. However, for the purpose of comparison with 2023, Statistics Sweden adjusts the 2024 figures 10% higher, “which corresponds to the reporting lag for the corresponding period in recent years”. Compared to 2023, total starts were down 2% Y/Y (vs -49% Y/Y between 2022 and 2023).
- There were 9,650 total completions in Q4, up was 6,180 in Q3. The 4Q rolling sum of completions fell to 39,420 from 46,400 last quarter. This reflects the sharp pullback in starts as the Riksbank began its hiking cycle in 2022.
- Sentiment amongst construction firms remains soft, but has been increasing in recent months. Meanwhile, an index tracking whether consumers are looking to buy a home in the next 12 months has also moved away from cycle lows.
GOLD TECHS: Trend Needle Points North
- RES 4: $3000.0 - Psychological round number
- RES 3: $2974.5 - 2.0% 10-dma envelope
- RES 2: $2962.2 - 2.00 proj of the Nov 14 - Dec 12 - 19 price swing
- RES 1: $2954.8 - High Feb 20
- PRICE: $2940.2 @ 07:29 GMT Feb 24
- SUP 1: $2916.9 - Low Feb 21
- SUP 2: $2867.1 - 20-day EMA
- SUP 3: $2834.3 - Low Feb 6
- SUP 4: $2783.1 - 50-day EMA
A bull cycle in Gold remains in play and the yellow metal continues to trade at its recent highs. Fresh recent highs once again confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on the $2962.2, a Fibonacci projection. The first key support to watch is $2867.1, the 20-day EMA.
