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UK DATA: PMI due at 9:30GMT; December cut still looks unlikely even with a miss

UK DATA
CEEMEAData BulletBulletUKMarketsFixed Income BulletsForeign Exchange Bullets
  • Following the weaker than expected flash PMI prints (particularly in services) across France, Germany and the Eurozone the market is probably now positioned for a softer UK services PMI print than the 52.0 Bloomberg consensus (which would be an unchanged print from October).
  • Will softer EZ PMIs translate across the channel to the UK? Historically, there has been a correlation between the prints - and we would argue that downside risks are even more exacerbated by the Budget - particularly the increase in employer NI and NLW (national living wage) increases.
  • As we noted, we would probably need to see a more substantial downside surprise to the 52.0 print for a big reaction in UK markets (given that they have already positioned more for weakness) but this remains very possible with this being the first post-Budget print.
  • However, even with a big surprise we still don't think we would see a December cut from the BOE. The Budget impacts have swayed the centre of the Committee to being more wary of structural changes to inflation which may keep it higher for longer - so "gradual" appears to remain in play for now. The biggest change that we could see on a softer run of data is if Taylor and / or Ramsden were to dissent in favour of a cut in December - but given their comments this week the bar is still fairly high for that as soon as December.
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  • Following the weaker than expected flash PMI prints (particularly in services) across France, Germany and the Eurozone the market is probably now positioned for a softer UK services PMI print than the 52.0 Bloomberg consensus (which would be an unchanged print from October).
  • Will softer EZ PMIs translate across the channel to the UK? Historically, there has been a correlation between the prints - and we would argue that downside risks are even more exacerbated by the Budget - particularly the increase in employer NI and NLW (national living wage) increases.
  • As we noted, we would probably need to see a more substantial downside surprise to the 52.0 print for a big reaction in UK markets (given that they have already positioned more for weakness) but this remains very possible with this being the first post-Budget print.
  • However, even with a big surprise we still don't think we would see a December cut from the BOE. The Budget impacts have swayed the centre of the Committee to being more wary of structural changes to inflation which may keep it higher for longer - so "gradual" appears to remain in play for now. The biggest change that we could see on a softer run of data is if Taylor and / or Ramsden were to dissent in favour of a cut in December - but given their comments this week the bar is still fairly high for that as soon as December.