EURIBOR OPTIONS: Outright Call Buyer

CBK (18/12/26) 17p, sold at 0.65 in 50k.

• Canada's population fell 76,068 or 0.2% in Q3 to 41,575,585, StatsCan said Wed in a preliminary estimate.
• By comparison the population in Q3 2023 grew the fastest since 1957 at +1%, and by +0.6% in Q3 2024.
• Fall led by non-permanent residents -176,479, mainly those on work and student permits. They now represent 6.8% of Canada's population, a share the govt has said is too high.
• Swings in population have pressured housing costs and made it more difficult to assess slack in the economy and job market. Unemployment has declined in recent months as hiring advanced while labor force declined.

The dovish repricing that followed this morning’s soft UK CPI data has pulled GBP 1y1y swaps further away from the upper boundary of the wedge structure that has formed (see chart below).

• The recent round of hawkish BoE repricing generated a false break above the upper boundary of the wedge early last week.
• Looking forwards, the pricing of a deeper BoE easing cycle is the most likely driver of any extension beyond the base of the wedge.
• Terminal rate pricing of 3.30% has provided a bit of a limitation for terminal rate pricing in recent weeks, but the soft CPI data does increase odds of a potential dovish departure from the market expectation of a 5-4 vote split to deliver a rate cut at tomorrow’s BoE decision.
• This morning’s CPI release may also make the rhetoric that accompanies the decision sound a little more dovish than it otherwise would have been.

Fig. 1: GBP 1y1y (%)

Source: MNI - Market News/Bloomberg Finance L.P.