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GBP Rally Fades Rapidly - Echoing Post-CPI Market Reaction

  • GBP's immediate spike on the BoE hike has entirely reversed (echoing the price action noted after the CPI release earlier this week), with GBP/USD back to pre-decision levels and just below the 1.2800 handle.
  • SONIA futures off the low by around 9bp at present. Sep23 contract dropped from 94.325 to a low of 94.09 and now back at 94.18.
  • Looking further out, however, Reds, Greens and Blues are generally around 6.5-7.5 ticks higher than they were prior to the decision.- So the market is frontloading more hikes but in the medium-term more cuts will be needed.
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