STIR: Markets Still Lean Towards 25bp BoE Cut Per Quarter Through Dec
GBP STIRs hold a little more hawkish on the day, with spill over from moves in the long end dominating.
- Still, markets continue to price between 45-50bp of cuts through year-end, with the softer-than-expected services PMI reading (particular focus on a soft employment component) and another round of weak retail sales data meaning that markets have not strayed from the familiar one BoE cut per quarter through year-end narrative.
- 22.5bp of easing priced for August, 26bp through September, 41bp through November and 46bp through year-end.
- We continue to point to 2 cuts through year-end, tied to the MPR meetings (August & November).
- SONIA futures flat to -3.0, prior July lows in SFIZ5 and SFIZ6 remain intact.
- Looking ahead, final manufacturing PMI data is due next week, with nothing in the way of BoEspeak scheduled until the August BoE decision.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 3.992 | -22.5 |
Sep-25 | 3.958 | -25.9 |
Nov-25 | 3.805 | -41.2 |
Dec-25 | 3.754 | -46.3 |
Feb-26 | 3.645 | -57.3 |
Mar-26 | 3.618 | -60.0 |
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OPTIONS: Expiries for Jun26 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1600(E5.1bln), $1.1625(E1.2bln), $1.1640-50(E907mln), $1.1700(E3.2bln)
- USD/JPY: Y142.00($1.3bln), Y143.00($1.4bln), Y147.00($782mln)
- AUD/USD: $0.6500(A$2.4bln)
- NZD/USD: $0.6040(N$522mln)
- USD/CAD: C$1.3715-35($1.7bln), C$1.3800($2.0bln)
SCANDIS: Downside Momentum In NOKSEK Extends
Weakening momentum in the Norwegian krone has extended today, despite more stable oil prices and unchanged 2-year swap rate differentials. That pulls NOKSEK down another 0.55%, with the cross on track for its fifth consecutive close lower and hovering just below support at 0.9374 (50% retracement of the April 9 – June 19 bull run). The 0.9300 handle provides the next downside target, aligning with the 61.8% retracement of the April-June rally.
- EURNOK is up 0.4% at 11.8022, consolidating above all major moving averages. An impending cross of the 50- and 20-day EMAs should support recent bullish price action.
- Today’s Norwegian credit data and June Riksbank minutes were not market movers. Tomorrow’s Scandi data calendar includes the June Economic Tendency Indicator in Sweden and the May LFS unemployment rate in Norway. Both should be interesting releases, but note that the next Riksbank and Norges Bank meetings are not till mid-August.
CROSS ASSET: Goldman Weigh In On -ve USD/Equity Correlation Development
Goldman Sachs note that through Tuesday, “the last eight trading sessions have seen opposing one-day moves in the USD and in SPX (either SPX up and USD down, or SPX down and USD up), which is the longest streak of that type so far this year”.
- This corresponds with the “1-month rolling beta of USD returns to SPX returns moving negative for the first time since early March”. Goldman partially attributes this to the “shift in the source of global growth and risk shocks away from the U.S., and toward rest of world (in this case mostly geopolitical developments in the Middle East)”.
