STIR: Just Over 45bp Of BoE Cuts Priced Through Dec, Dovish Dhingra Due
Mar-27 07:44
Light dovish moves in GBP STIRs, which look to Bunds for direction in light of the latest U.S. tariff developments.
- BoE-dated OIS flat to 1bp more dovish vs. yesterday’s closing levels. 18.5bp of cuts priced for May, 21bp through June, 32bp through August and 46bp through December.
- SONIA futures flat to +3.0.
- Note that GBP STIRs lag the dovish move in EUR peers since yesterday’s U.S. auto tariff announcements, given relative exposure and perceptions surrounding the ECB’s reaction function.
- BoE dove Dhingra will speak on inflation targeting in the UK post-pandemic period at 08:30 GMT.
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 | 4.134 | -32.3 |
Sep-25 | 4.099 | -35.8 |
Nov-25 | 4.024 | -43.3 |
Dec-25 | 3.996 | -46.0 |
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CROSS ASSET: Bitcoin falls over $5000
Feb-25 07:44
- Since Bitcoin has now broken through $89,329.20, the January low, it is now trading at its lowest level since November.
- Next support comes at $88,027.58, the 50% retracement of the US presidential Result (Trump Win), printed a 88,239.23 low, and back up to 89,000 now.
GERMAN DATA: GDP Inline W/ Flash, Inventories Contribute +0.8ppt
Feb-25 07:38
Germany's final Q4'24 GDP growth figures came in in line with the flash release at -0.2% Q/Q (+0.1% Q3).
- Inventories stand out, contributing +0.8% percentage points to the Q/Q print (the same contribution as in Q3). That means excl. inventories, Q/Q GDP growth would have been -1.0% (and -0.7%Q/Q in Q3).
- Other underlying drivers were also released, showing a rise in government expenditure, little moves in private consumption and declining exports. The bigger picture remains that the German economy continues to stall.
- Private consumption +0.1% Q/Q vs +0.4% cons, +0.2% Q3 (revised from +0.3%): A "consumption-driven recovery" was the big hope for the German economy about a year ago - these expectations appear to not really have materialized.
- Government spending +0.4% Q/Q vs +1.5% Q3 (revised from +0.4%, no cons): Talks to allow more military spending in the context of the constitutional debt brake (which currently limits cycle-adjusted net issuance to 0.35% of GDP) are underway - an agreement here would put on upside pressure going forward.
- Capital investment excl. inventories +0.4% Q/Q vs -0.5% cons, -0.5% Q3 (revised from -0.1%): Stronger than expected, driven upward by construction, and the first increase since Q1 2024. This was the most worrying part of the expenditure split in recent quarters - the uptick is good news in theory, but doesn't move the needle massively especially considering machinery / equipment investment was negative again.
- Exports -2.2% Q/Q vs -1.9% Q3 (no cons). This shows a continued absence of robust demand for German goods. Looking forward, there also appears to be little sign of an imminent rebound, as sentiment suggests.
USD: Lower Yields and Risk Off are supporting the Yen
Feb-25 07:35
- As noted in the Bund comment there's very little change intially across multi assets going into the European session.
- The early push lower is Equities, is supporting Core Govies, as Trump look for tougher Chips control over China, Dutch ASML is falling pre Open.
- The Dollar was flat overnight against all G10s, the EUR was the small winner, albeit by just 0.09%, and the NOK was down 0.04%, in a sense, a flat Dollar.
- Since the early Risk Off tone, JPY is now just up 0.11%, and the NOK is still down 0.06%, but the push higher in Bond futures and in turn a dip in Yield is putting pressure on the USDJPY, next support is seen a little further out, down to 148.85 Low Feb 24.
- The Yen is now seeing broader bid on the Risk Off tone.
