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Headline inflation a tenth higher than exp, but market looking for more

UK DATA
  • GBP marginally weaker after the CPI print (despite headline coming in a tenth higher than expected). Remember going into this print, markets were pricing around 45bp for the August MPC meeting. The MNI Markets team had said after the June MPC meeting that we saw around a60% probability of a 50bp hike but that it would depend upon the data.
  • Given Bailey's comments yesterday and the recent data, we now think there is closer to a 70% probability of a 50bp hike in 2 weeks. However, that is still less than priced in by the market.
  • We think we may see the SONIA strip move a little higher on the open - with some market participants having been looking for a higher print.

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