UK DATA: Inflation expectations pick up notably; a major concern for the MPC
Sep-12 2025 08:39
- This Bank of England/Ipsos Inflation Attitudes Survey is going to be a concern to the MPC. Expectations for the coming year up to 3.6% from 3.2% (in May) is a concern (for pay negotiations in particular). This is the highest since February 2023 and is influenced by spot inflation - but that is the BOE's concern as food inflation in particular continues to move higher.
- Expectations for the year after that expectations are up to 3.4% from 3.2% (again highest since Feb 2023) and in 5-years time at 3.8% from 3.6% (highest since Nov 2022).
- In fact that 5-year expectation has not been higher (to 1dp) since August 2011.
- These data make a cut in November or December look less likely. We would reserve judgment until seeing next week's labour and CPI data but this increase in inflation expectations may well be enough to push the next cut into next year in our view.
- Markets already only fully price the next cut by April, so market pricing may be less influenced than sellside views by these data.
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SWAPS: German Spreads Recover From Recent Lows Alongside Outright Bond Rally
Aug-13 2025 08:36
German swap spreads and ASWs widen alongside the recovery rally in outright bonds this morning, recovering from multi-week/month lows registered yesterday.
- Bull flattening on the cash bond curve translates to outperformance for long end swap spreads & ASWs.
- Earlier today Commerzbank noted that “Schatz-ASW breached the recent range, briefly hitting 11bp vs. €STR yesterday. This marks the cheapest levels since early March when the German fiscal package was making headlines and slightly exceeds current German GC spreads vs. €STR. Without structural cheapening in repo rates and other front-end drivers, we expect Schatz to stay anchored with GC serving as cap similar to the past months and anticipate spreads will reverse".
CROSS ASSET: Equities and Bonds are extending gains, record high in the Emini
Aug-13 2025 08:33
- Equities and Bonds are still extending higher, the US Emini prints a new all time record high on hope of a Fed cut in September.
- The German Bund is back above pre US CPI level, and next small resistance comes at 129.83.
- Some decent buying in the past few minutes in EGBs too, BTP in 2k, and already 53k lost traded for the Italian contract, as Bonds reverse Yesterday afternoon sell off
- The fall lower in Yields is putting the lid on the USD, new fresh lows against the GBP, EUR, MYR, INR, THB, SEK, CNY, AUD, NZD, CHF, JPY.
FOREX: FX OPTION EXPIRY - Large in the EUR Thursday
Aug-13 2025 08:21
Of note:
EURUSD 2.24bn at 1.1700/1.1710.
USDJPY 1.06bn at 147.00.
EURUSD 6.62bn at 1.1695/1.1725 (thu).
AUDUSD 1.25bn at 0.6600 (thu).
- EURUSD: 1.1650 (833mln), 1.1700 (1.46bn), 1.1705 (382mln), 1.1710 (397mln).
- USDJPY: 146.75 (570mln), 146.85 (752mln), 147.00 (1.06bn), 147.50 (263mln).
- GBPUSD: 1.3510 (471mln), 1.3540 (203mln), 1.3550 (317mln).
- USDCAD: 1.3725 (555mln), 1.3835 (417mln).
- AUDUSD: 0.6550 (597mln), 0.6575 (747mln).
