GBP STIRs Move Back Towards Fully Discounting August Cut

GBP STIR markets edge away from early hawkish session extremes alongside the previously covered recovery in core global FI markets.

• SONIA futures are little changed to +3.0 through the blues.
• ’24 BoE-dated OIS contracts are little changed to 2bp softer on the day, nearly fully pricing a 25bp cut through the end of the August MPC (a scenario we had flagged as likely despite the hawkish repricing seen in recent weeks). Further out, ~53bp of ’24 cuts are priced.
• Friday’s dovish offering from BoE’s Ramsden continues to dominate discussions, while geopolitical headline flow and lower crude oil prices also factor into the move.
• Any impact from the previously covered local fiscal speculation and house price data has been negated by the above matters.
• Friday saw Goldman Sachs suggest that “the UK front-end is underpricing the risk of BoE cuts.” They flagged recent comments from the BoE leadership in their considerations. They also stressed that retail sales remain weak and the quantity side of the labour market data has weakened (despite some uncertainty re: the latter). As a result, they believe that BoE pricing beyond June to end-2024 will flatten into the May MPC and April inflation data.