Headline AWE Pressures SONIA, Before Details Limit Move

Fallout from the UK labour market data, namely the firmer than expected average weekly earnings print flagged earlier, biases the SONIA strip cheaper at the open.

• A quick reminder that the AWE including bonus metric was skewed by one-off bonus payments in the public sector. The more important series for BoE policy is the private sector excluding bonus measure. This slowed slightly to 7.8% Y/Y in September (from 8.1% the prior two months and 8.2% in June), registering the lowest Y/Y increase seen since April in the process.
• The deviation in the dynamics seen in those two releases helps explain the general tick away from early session lows on the SONIA strip, with futures last flat to -3.5 through the blues.
• Liquid BoE-dated OIS contracts are little changed to 2bp firmer post-data.
• Comments from BoE dove Dhingra (on ‘food supply and inflation’) and chief economist Pill (on ‘what next for central banks?’’) will filter out today.
• A quick reminder that MPC hawk Mann spoke on Monday, as she flagged that climate shock presents the risk of more persistent inflation.
• Speculation surrounding the ramifications of yesterday’s government cabinet reshuffle continue to dominate the local press.
• UK Chancellor Hunt noted that it is “heartening” that inflation is “falling” and real wages are growing. He also noted that the Budget will set out plans to get people bank into work and deliver growth for the UK.