STIR: Markets Continue To Look For Dec BoE Cut, Follow Up Mostly Priced Thru Apr
No real movement in the GBP short end after yesterday’s soft domestic data underpinned GBP duration and kept markets leaning heavily towards a resumption of the BoE cutting cycle later this month.
- Note ongoing bearish cues from EGBs, albeit with domestic dynamics dominating at present, making for outperformance in UK duration in recent sessions.
- BoE-dated OIS pricing 22bp of easing for this month, 29.5bp through February, 38bp through March, 49bp through April and 54.5bp through June.
- SONIA futures effectively unchanged across the curve. Terminal rate pricing continues to oscillate between 3.30-3.35%, with any moves below the former quickly countered in recent weeks.
- Potential catalysts for a fresh dovish move include dovish messaging alongside the almost fully discounted December BoE rate cut, further deterioration in labour market data (as seen in yesterday’s BoE DMP survey) and swifter than envisaged progress towards the Bank’s inflation target.
- Little of note on the UK calendar ahead of the weekend.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.752 | -22.0 |
Feb-26 | 3.676 | -29.6 |
Mar-26 | 3.589 | -38.3 |
Apr-26 | 3.483 | -48.9 |
Jun-26 | 3.429 | -54.3 |
Jul-26 | 3.360 | -61.2 |
Sep-26 | 3.341 | -63.1 |
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STIR: Stournaras Interview With MNI Policy Team Consistent With Market Pricing
In an interview with the MNI Policy Team yesterday, Bank of Greece Governor Stournaras struck a slightly more dovish tone than the median Governing Council member, in our view. However, his comments, were consistent with current market pricing, which retains a modest easing bias.
- Stournaras noted that “you will see most of the arguments are in favour of inflation and growth becoming lower but despite that we don’t jump to the conclusion that we should cut in the next meeting,”
- The ECB’s 2028 inflation projections, which will be presented in December for the first time, remain a hot topic in policymaker interviews. Stournaras’ remarks on the issue were quite pragmatic: While the projections will be a “key input” for the ECB, other data and “judgement” will play an important role. He suggested that he would be more concerned if spot inflation rates fall below target (Flash October headline was 2.1% Y/Y, core was 2.4%).
- ECB-dated OIS price ~12bps of easing through September 2026. Meanwhile, the Euribor Z5-U6 spread is -8.5 ticks, off mid-October lows of -16.5 ticks.
- French September industrial production was stronger-than-expected at 0.8% M/M (vs 0.1% cons, -0.9% prior). This followed a better-than-expected German factory orders reading earlier.
- October services PMIs (finals for France, Germany and the Eurozone) are due this morning, alongside Italian retail sales, the ECB’s latest wage tracker and Eurozone September PPI.
- ECB’s Villeroy, Nagel and Kocher are scheduled to speak today.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Dec-25 | 1.916 | -1.6 |
| Feb-26 | 1.900 | -3.2 |
| Mar-26 | 1.859 | -7.3 |
| Apr-26 | 1.849 | -8.3 |
| Jun-26 | 1.817 | -11.5 |
| Jul-26 | 1.815 | -11.7 |
| Sep-26 | 1.810 | -12.2 |
| Oct-26 | 1.805 | -12.7 |
| Source: MNI/Bloomberg Finance L.P. | ||
AUDNZD: Westpac Doubtful Of Meaningful Extension Higher From Here
Further to the the prior comment on AUD/NZD, Westpac note that “AUD/NZD is currently probing multi-year highs around 1.1500. We suspect a sustained break at this juncture will be difficult, because the dominant theme - Australian economic outperformance vs. NZ (and resultant rise in AU/NZ yield spreads to 13-year highs) - is now in the price”.
- They suggest that a sustained move higher would “require further data and central bank surprises. If anything, our economists’ views suggest an eventual narrowing of AU economic outperformance”.
- They highlight “RBNZ guidance in November be key to near term direction”, while noting that “the RBA has not closed the door to further easing”.
- Still, they remain “biased to buy on significant dips in the near term, with the 1.1400 area worthy of consideration”.
MNI: FRANCE SEP IND PROD +0.8% M/M, +1.3% Y/Y (VS -0.9% M/M, +0.1% Y/Y AUG)
- MNI: FRANCE SEP IND PROD +0.8% M/M, +1.3% Y/Y (VS -0.9% M/M, +0.1% Y/Y AUG)
- FRANCE SEP MANUF OUTPUT +0.9% M/M, +1.5% Y/Y (VS -1.0% M/M, +0.2% Y/Y AUG)
