UK DATA: Monthly GDP, Trade Disappoint; Labour Data More Important for MPC (1/2)
Jun-12 06:53
- Looking a bit more into the UK GDP data, there are some inconsistencies in the Bloomberg survey. As this is the first print of the quarter the prior series was not open for revisions and yet the 3m/3m GDP print came in line with expectations at 0.7% while the M/M print missed by two tenths at -0.3%. There are less survey respondents for the former, and they tend to be the larger institutions so this might not be as much of a surprise as expected. Looking at the breakdown it appears construction was stronger than expected with all other subcomponents softer.
- We appear to be tracking below the BOE's Q2 GDP forecast. Taking a really simple back of an envelope calculation, the index value for Q1 GDP (taken from the monthly average) was 102.3 - which is the same level the April number printed today.
- We are only one month into the quarter but with zero growth between Q1 and the April print, we would need some revisions or very strong May and / or June data in order to meet the BOE's 0.1%Q/Q forecast (although recall that the BOE had forecast Q1 GDP a tenth above expectations and in recent comments have noted there were some temporary factors boosting the Q1 print that are expected to reverse).
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STIR: Around 50bp Of BoE Cuts Priced Through Year-End
May-13 06:48
Modest dovish moves in GBP STIRs after the open.
- The quantity side of the labour market report broadly met expectations, although our macro team highlights that the downside surprise in the private regular AWE metrics was notable, undershooting the BoE’s forecast by 0.21ppt.
- A move away from overnight lows in Bunds also helps prevent an extension of the recent hawkish moves at this stage.
- BoE-dated OIS showing 3bp of cuts for June, 21bp through August, 29bp through September, 44bp through November and 49bp through December. Contracts through year-end are 0.5-2.5bp more dovish vs. closing levels.
- December meeting implied rate pricing is ~30bp off the dovish extreme seen in late April.
- SONIA futures little changed to +1.5.
- Comments from BoE Governor Bailey and hawkish dissenter Pill are due today.
- We will be watching to see if Pill repeats a line from the Agents’ briefing, which noted that if there are external shocks the pace of cuts could be adjusted. However, the setting and topic of the event may mean that Pill doesn’t touch on monetary policy/no headlines are seen (the speech will be at the London School of Economics conference in honour of Sushil Wadhwani).
- U.S. CPI data and broader tariff headlines are eyed on the macro front.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.184 | -2.6 |
Aug-25 | 4.000 | -21.0 |
Sep-25 | 3.921 | -28.9 |
Nov-25 | 3.774 | -43.7 |
Dec-25 | 3.721 | -49.0 |
Feb-26 | 3.646 | -56.4 |
Mar-26 | 3.634 | -57.7 |
EURIBOR OPTIONS: Call spread seller
May-13 06:43
ERU5 97.87/98.00cs, sold at 9.5 in 10k.
USD: A red start for the Dollar
May-13 06:40
- The Dollar is in the red against all G10s going into the European session, a small unwind in the Greenback and in Equities.
- Overall, the short term 5 days picture shows the Dollar deep in the green, the safer haven currencies, Yen and CHF, are down 3.71% and 2.57% respectively for that short period.
- Best early performers are the Aussie and the Kiwi, the latter has found some support at 0.5847, this was Yesterday's low in NZDUSD, its lowest printed level since 14th April.
- Yesterday's low in AUDUSD was just a new low print for May and the AUDUSD is back at Yesterday's wide traded mid range.
- AUDNZD is still eyeing the initial upside target of 1.0909/1.0914.
