BoE Pricing Off Dovish Session Extremes

As noted elsewhere, BoE-dated OIS has eased away from dovish session extremes, with core global FI markets off best levels.

• The initial post-data impulse saw markets look to continued signs of a loosening labour market, albeit moving from a historically tight base.
• The move away from best levels in core global FI, coupled with still elevated wage growth, has probably provided the catalysts for the move back from session extremes.
• Liquid contracts sit 0.5-3.5bp softer across the strip.
• That leaves a familiar ~21bp of tightening showing for this month’s MPC, while terminal policy rate pricing sits at 5.65% i.e. 40bp of tightening is priced vs. prevailing SONIA levels.
• A quick reminder that various SONIA options plays have been geared towards no further BoE rate hikes, as we flagged earlier earlier today.
• Domestically, monthly economic activity data will cross tomorrow, but it is next week’s CPI release that provides the next scheduled input of note for participants.