Hawkish SONIA Pressure Countered By Finer Wage Details

SONIA futures are +0.25 to -2.5 through the blues, off initial knee-jerk lows seen in the wake of today’s domestic labour market data.

• The contracts are roughly in line with late Monday levels.
• BoE-dated OIS shows 50/50 odds of a cut at next month’s MPC, with ~54bp of cuts priced through year end, little changed vs. late Monday levels.
• The impact of the firmer-than-expected headline wage metrics is being countered by the 3-month private sector wage figure, which printed below the BoE’s forecast (see earlier bullets for more colour on that dataset).
• Unemployment also ticked higher, matching wider expectations.
• We view this as another hurdle cleared when it comes to the potential for a June rate cut.
• However, last week’s MPC meeting de-emphasised labour market data somewhat, with services CPI taking on even more importance and PMI data on costs/output prices becoming increasingly meaningful.
• BoE chief economist Pill will speak later today (08:30 London), but he has already appeared post-MPC. Furthermore, his appearance at the Chartered Accountants Economic Summit has no text scheduled, so it is unlikely to be an appearance that sees a meaningful change in tone.
• U.S. PPI data will generate cross-market interest.