Short sterling under pressure again following CPI print

The short sterling strip has opened lower this morning following the CPI data which came in three tenths above expectations. This follows up yesterday's labour market data which showed stronger payroll growth than expected in the first month after furlough ended.

• The Dec21 contract has moved 1.5 ticks lower, with a December 15bp hike now pretty much fully priced.
• Other Whites/Reds/Greens have moved 2.5-4.0 ticks lower at writing.
• This means that markets are now pretty much fully pricing a February 25bp hike too, with Bank Rate above 1.25% by the end of 2021 and the terminal rate has also fallen with the Sep-23 contract now 98.475 (effectively pricing rates at 1.50%.
• The inversion after this remain, with Sep23-Sep25 inverted by 27.5 ticks at the time of writing.
• Gilts are due to open at 8:00GMT and we would expect a bear flattening of the curve this morning.
• There's no other notable UK data or MPC speeches scheduled for today, so after digesting this data, UK markets will start to look at more external events - particularly commodity price moves.