BoE Pricing Biased Dovishly In Wake Of Labour Market Data

The direction of travel in the previously covered partial UK labour market and wage data has promoted some dovish movement in BoE-dated OIS today, although the general cheapening dynamic in wider core global FI markets has dragged the space off of dovish session extremes.

• Liquid contracts are last 1.5-3.0bp softer on the session, with the strip flattening.
• ~7bp of tightening is priced for next month’s BoE decision, with terminal policy rate pricing ~16bp above prevailing levels.
• While the data probably isn’t a gamechanger for the BoE, the market’s recent bias to price in more than even odds of one further 25bp rate hike, coupled with signs of continued loosening in the labour market, has resulted in a dovish market reaction.
• Elsewhere, we noted that BoE dove Dhingra stuck to her usual script.