BoE Cut Pricing Rebounds, With ECB Seen Firmly Steady

There remain 11bp of further BoE hikes priced to the peak in Feb/Mar 2024, with just 3bp eyed for next week's meeting - a 12% probability of a 25bp hike, vs closer to 50/50 as of end-Sept. That's little changed today despite more dramatic moves at the longer end of the rates spectrum.

• Cuts have been increasingly priced back into the implied BoE rate path over the past 2 sessions, after easing expectations hit a recent low last Thursday (following dovish-leaning commentary by Fed Chair Powell). At end-Thurs, 43bp of BoE cuts were priced for the 12 months following the peak in early 2024; by end Friday that was up to 56bp and today advanced to 58bp - back to Oct 17 levels. That's been a combination of a fall in implied rates overall, but also a lower peak (expected further hikes had been 19bp on Thu morning, vs the aforementioned 11bp).

Our ECB preview went out today - the clear expectation is for a hold (0% implied prob of a hike priced). There's still just 3bp of hikes priced in the cycle overall to the Dec 2023 peak.

• This Thursday's decision has the potential to change that but our ECB previewexpects communications to be largely unchanged from September - with no announcement on PEPP or reserve remuneration, but potentially acknowledgement that balance sheet policy discussions are taking place. There's still around 65bp of cuts priced over 2024, around the same levels as have been seen in recent months.