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Dovish Impact From Fed, A Little Over 40bp Of 24 Cuts Priced

STIR
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Spill over from last night's FOMC decision filters into GBP STIRs at the open, leaving SONIA futures 0.25-7.5bp higher vs. settlement, with most contracts a little shy of their early session highs.

  • BoE-dated OIS shows ~42bp of cuts vs. ~36bp late yesterday.
  • A full 25bp cut is once again fully discounted through the end of the Sep MPC.
  • Plenty of desks argue that GBP STIRs have exhibited an exaggerated beta to the recent U.S. data developments and hawkish Fed repricing.
  • While we don’t disagree, further slowing of the UK CPI/wage pressures and related BoE communique is probably required to trigger greater divergence in Fed & BoE pricing.
  • The UK calendar is essentially empty today, which will leave focus on broader macro headline flow and post-FOMC reaction in EUR & GBP markets.
BoE MeetingSONIA BoE-Dated OIS (%)Difference Vs. Current Effective SONIA Rate (bp)
May-245.200+0.0
Jun-245.118-8.2
Aug-245.002-19.8
Sep-244.937-26.3
Nov-244.842-35.8
Dec-244.778-42.2
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Spill over from last night's FOMC decision filters into GBP STIRs at the open, leaving SONIA futures 0.25-7.5bp higher vs. settlement, with most contracts a little shy of their early session highs.

  • BoE-dated OIS shows ~42bp of cuts vs. ~36bp late yesterday.
  • A full 25bp cut is once again fully discounted through the end of the Sep MPC.
  • Plenty of desks argue that GBP STIRs have exhibited an exaggerated beta to the recent U.S. data developments and hawkish Fed repricing.
  • While we don’t disagree, further slowing of the UK CPI/wage pressures and related BoE communique is probably required to trigger greater divergence in Fed & BoE pricing.
  • The UK calendar is essentially empty today, which will leave focus on broader macro headline flow and post-FOMC reaction in EUR & GBP markets.
BoE MeetingSONIA BoE-Dated OIS (%)Difference Vs. Current Effective SONIA Rate (bp)
May-245.200+0.0
Jun-245.118-8.2
Aug-245.002-19.8
Sep-244.937-26.3
Nov-244.842-35.8
Dec-244.778-42.2