STIR: Market Leans Heavily Towards Dec BoE Cut After Jobs Data, CPI Next Up
The dovish move in the GBP short end also extended in the wake of the soft U.S. weekly ADP employment print, before fading from, session extremes.
- This morning’s UK labour market data drove meaningful repricing.
- Liquid BoE-dated OIS contracts are 3.8-8.6bp more dovish on the day, with ~21bp of easing priced for December, 31bp through February, 40bp through March and 51bp showing through April.
- SONIA futures last flat to +8.0, with the year-to-date high in SFIZ6 (96.700) holding to the tick.
- SFIZ5/Z6 registered an incremental fresh cycle low at -42.5 vs. -42.0 previously.
- SONIA options flow has been heavily skewed towards upside structures.
- GBP 1y1y also broke its October lows but failed to test the year-to-date low at 3.343%.
- Meaningful dovish extension in the immediate future would require the market to price a December cut with near certainty.
- We get two CPI releases ahead of the Bank’s December meeting (the first coming next week).
- The recent adjustments to the BoE’s forecasts mean that downside surprises to headline CPI are going to be harder to achieve when compared to the previous forecasts.
- If the soft details in today's labour data are not revised away in the next release, we assume that in line CPI readings would be enough to tilt the balance towards Governor Bailey joining the dovish camp, cementing a December cut.
- Note that J.P.Morgan now expect three more BoE rate cuts, coming in December, March, & June, which would leave the terminal rate at 3.25% (previously they looked for cuts in February & April, to a terminal rate of 3.50%).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.762 | -20.8 |
Feb-26 | 3.658 | -31.1 |
Mar-26 | 3.570 | -40.0 |
Apr-26 | 3.459 | -51.1 |
Jun-26 | 3.411 | -55.9 |
Jul-26 | 3.359 | -61.1 |
Sep-26 | 3.336 | -63.4 |
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US: Trump Oval Office Announcement Underway Shortly
US President Donald Trump is shortly due to deliver an announcement in the White House Oval Office. LIVESTREAM The announcement is expected to relate to drug pricing and could follow a similar template to a recent pledge from Pfizer.
- The announcement will be Trump's first press remarks since a market-moving Truth Social statement earlier today in which Trump suggested calling off a meeting with Chinese President Xi Jinping and raising tariffs on China in response to new export controls from Beijing on rare earths. See earlier bullets here and here.
RATINGS: Moody's Completes Periodic Review Of Belgium, No Rating Action
No ratings actions for Belgium from Moody's, which is quoted in a press release on Bloomberg: "Moody's Ratings (Moody's) has completed a periodic review of the ratings of Belgium and other ratings that are associated with this issuer. The review was conducted through a rating committee held on 2 October 2025 in which we reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), and recent developments. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future."
- There had been some speculation there could be a ratings action - MNI wrote Thursday: "* Moody's on Belgium (Current rating Aa3, Outlook Negative): We expect Moody's to maintain their current stance in the absence of 2026 budget details."
MACRO ANALYSIS: US Macro Week Ahead: No CPI, But Plenty Of Pre-Blackout FedSpeak
Below is the week’s data schedule, with MNI’s annotation of whether or not data will be postponed.
- As we went to press, the Fed announced that next week's Industrial Production data will be postponed (was due to be published next Friday Oct 17) as the data “incorporate a range of data from other government agencies, the publication of which has been delayed as a result of the federal government shutdown.”
- We won’t be getting September CPI as scheduled on Oct 15, but at least the BLS announced it will publish the data on Oct 24.
- As such next week we’ll be looking at some under-covered data points, including the Redbook weekly and Chicago Fed’s CARTS retail sales data (in lieu of the Census Bureau retail sales report), with a little more focus than usual on regional Fed manufacturing indices (NY, Philadelphia).
- Once again, the dearth of tier-one data leaves Fed commentary in focus ahead of the pre-FOMC blackout period: highlights for us are Philadelphia Fed President Paulson making her first comments on monetary policy on Monday since being appointed in the summer, while as always Chair Powell bears watching on Tuesday (we also hear from Bowman, Waller, Collins, Miran, Schmid, and Musalem).
- Additionally we get the latest Beige Book which was already key given the FOMC was already increasingly focused on anecdotal information as it attempts to navigate murky economic waters.
