SONIA Futures Under Some Pressure On EU Political Uncertainty, ~32bp Of ’24 BoE Cuts Priced

The post-EU election political uncertainty in France has pressured wider core global FI markets, leaving SONIA futures flat to -3.5 through the blues.

• BoE-dated OIS contracts are little changed to 1.5bp higher through the end of ’24.
• The first 25bp cut is still just about fully discounted come the end of the Nov MPC, with ~32bp of cuts priced through year end.
• The political situation in Europe has added to the hawkish move seen in the wake of last week’s ECB decision & U.S. NFPs, allowing BoE-dated OIS to move back towards recent hawkish extremes.
• The KPMG-REC Report on Jobs showed that the labour market continues to soften, although at a slower pace than in April with wage growth remaining sticky.
• Overall, the release offered no real encouragement to BoE MPC members who are contemplating when to enact their first vote to cut rates and point towards wage growth remaining stickier than forecast in the May MPR.
• Elsewhere, political headlines continue to dominate ahead of the release of the Conservative & Labour election manifestos in the coming days. Labour still holds a very wide lead in the polls.
• Tomorrow’s UK labour market report presents the next domestic focal point. Expect our full preview of that release to cross this afternoon.