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BoE Terminal Rate Falls Below Fed's For First Time In A Month

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The expected BoE terminal rate (4.43% Jun 2023) this morning fell below the Fed's (4.47% Mar 2023) for the first time since August 17th, helping drive the pound lower vs the US dollar.

  • This is mainly a function of upward Fed pricing (almost 50bp added to the Fed's hiking path) after this week's US CPI surprise.
  • Weak UK economic data - including this morning's below-survey August retail sales - mean BoE hike expectations have simply failed to keep pace.

Jun2023 BoE Implied Rate (%) In Blue Vs Mar2023 Fed (%) In WhiteSource: BBG, MNI

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The expected BoE terminal rate (4.43% Jun 2023) this morning fell below the Fed's (4.47% Mar 2023) for the first time since August 17th, helping drive the pound lower vs the US dollar.

  • This is mainly a function of upward Fed pricing (almost 50bp added to the Fed's hiking path) after this week's US CPI surprise.
  • Weak UK economic data - including this morning's below-survey August retail sales - mean BoE hike expectations have simply failed to keep pace.

Jun2023 BoE Implied Rate (%) In Blue Vs Mar2023 Fed (%) In WhiteSource: BBG, MNI