STIR: Fiscal Questions Drive Hawkish BoE Repricing
The recovery in risk appetite and questions surrounding the government’s fiscal credibility (detailed throughout the day) have driven meaningful hawkish repricing in the GBP short end.
- BoE-dated OIS shows 18.5bp of easing for December, 26.5bp through February, 34.5bp through March and 44bp through April.
- SONIA futures now trade 0.25-13.0 lower.
- SFIZ6 is 13.5 off highs (November low at 96.550 presents the downside target), while SFIZ5/Z6 is 10.5 off cycle lows.
- GBP 1y1y is 16bp off month-to-date lows, with the pre-existing ’25 base holding before the move higher seen during the second half of this week.
- CPI data headlines next week’s calendar (see recent bullet for more detail on our early thoughts ahead of the release)
- Ultimately, we think that if the inflation data is in line and we don't see a big reversal in the labour market weakness just ahead of the MPC decision there would still be enough evidence for Governor Bailey to vote for a December cut, irrespective of any changes to income tax (unless there is something explicitly inflationary in the Budget).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.787 | -18.3 |
Feb-26 | 3.703 | -26.6 |
Mar-26 | 3.624 | -34.5 |
Apr-26 | 3.531 | -43.8 |
Jun-26 | 3.494 | -47.6 |
Jul-26 | 3.453 | -51.6 |
Sep-26 | 3.437 | -53.2 |
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MNI EXCLUSIVE: EU Officials Comment on France's Fiscal Situation
EU officials comment on France's fiscal situation - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
US 10YR FUTURE TECHS: (Z5) Sights Are On The Bull Trigger
- RES 4: 114-10 High Apr 7 (cont.)
- RES 3: 114-00 Round number resistance
- RES 2: 113-29 High Sep 11 and the bull trigger
- RES 1: 113-17+ High Oct 14
- PRICE: 113-13+ @ 16:45 BST Oct 15
- SUP 1: 112-26 20-day EMA
- SUP 2: 112-16/01 50-day EMA / 50.0% of Jul 15 - Sep 11 upleg
- SUP 3: 111-26 Low Aug 26
- SUP 4: 111-13+ Low Aug 18 and a key support
Treasuries are holding on to this week’s gains and a bullish theme remains intact. Last Friday’s climb resulted in a break of the 113-00 handle, signalling scope for stronger rally towards 113-29, the Sep 11 high and a bull trigger. Clearance of this hurdle would confirm a resumption of the M/T uptrend. Support at the 50-day EMA at 112-16 remains intact for now. A clear break of the average would expose 111-13+, the Aug 18 low and a key support.
FOREX: USD Index Weaker Again, Despite Bessent Optimism
- The USD Index started the session weaker and generally maintained those losses through the London close. Powell's relative easing bias late on Tuesday provided the initial trigger, but the much firmer-than-expected CNY fix from the PBOC also worked against the greenback.
- An appearance at the IMF / World Bank forum helped trigger a brief spell of USD support. Bessent's optimism on growth, laying out the groundwork for US growth akin to the "late 1800's or 1990's" is helping the USD higher at the margins and pressing EURUSD toward flat (thereby erasing the ~40 pip gains at the European open). The better-than-expected Empire Manufacturing print will also be helping.
- US 10y yields finding a base at 4.00% has proved a key catalyst, although markets have looked through the persistent S/T uptrend in equities across Wednesday.
- Focus for the duration of the Thursday session turns to the Australian jobs print for September, expected to show employment change of +20k in the month with an unchanged participation rate. AUD had a quieter Wednesday session, despite Treasury Secretary Bessent talking up the possibility of a longer rare earths trade truce with China. This keeps the near-term picture unchanged after Tuesday's new cycle low. However, Tuesday’s recovery highlights a possible reversal pattern - a hammer candle formation. If correct, it signals the end of the bear leg that started Sep 17.
- UK data are also in focus Thursday - with GDP stats as well as industrial and manufacturing production. Ahead of the Thursday print, a late rally in GBP saw GBP/USD rally back to 1.34 on decent volumes. While there was no specific UK newsflow or headlines to drive the move, it helped EURGBP drift into the London finish, closing the gap with the French pension reform-tied rally from earlier in the week.
