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STIR: Around 45bp Of BoE Cuts Priced Ahead Of Heavy Data Week
GBP STIRs also slightly more hawkish this morning as core global FI markets remain under pressure, although recent hawkish extremes remain intact.
- BoE-dated OIS shows 17bp of cuts for February, 20bp through March, 30bp through May and 46bp through year-end.
- SONIA futures flat to -6.0
- The market-implied cutting cycle continues to look shallow in our view, we expect cuts at both the February and May meetings.
- J.P.Morgan agree and have recommended receiving February BoE-dated OIS, alongside maintaining Aug ‘25/Dec ‘25 BoE-dated OIS flatteners.
- CPI data (Wednesday) headlines the domestic calendar this week. That reading will be much more consequential for markets than the monthly GDP (Thursday) and retail sales (Friday) data.
- We will provide the usual data preview and review around the CPI release.
- Comments from BoE dovish dissenter Taylor (Wednesday) also eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.529 | -17.2 |
Mar-25 | 4.501 | -19.9 |
May-25 | 4.401 | -29.9 |
Jun-25 | 4.382 | -31.8 |
Aug-25 | 4.324 | -37.6 |
Sep-25 | 4.302 | -39.8 |
Nov-25 | 4.254 | -44.6 |
Dec-25 | 4.240 | -46.0 |
STIR: 90bp OF ECB Cuts Priced Through '25, Lane & Rehn Stick To Script
Modest hawkish repricing in EUR STIRs this morning as core global FI markets remain under pressure.
- ECB-dated OIS covering this month’s meeting little changed, showing 23.5bp of cuts, with ~90bp of easing now showing through December, as the recent round of hawkish repricing extends further.
- The market remains comfortable with the idea of cuts at the January and March meetings.
- However, the market-implied ECB cutting path is now much flatter, with pricing of the potential for 50bp steps removed in recent weeks.
- April & June meetings are priced much closer to 50/50 when it comes to the odds of further cuts.
- Euribor futures 1.0-3.5 lower, off session lows as Bunds edge away from lows in recent trade.
- Much of the strip is threatening clean breaks below October/November lows.
- Little of note in comments from ECB’s Lane & Rehn, sticking to the Bank’s central view.
- Lane noted that the Bank will have to follow “the middle path of being neither too aggressive nor too cautious in our actions.”
- Rehn pointed to a clear direction of travel, with rates set to leave restrictive territory come summer.
- Looking ahead, final Eurozone CPI data is due on Friday, with a raft of ECB speak and the minutes of the December meeting due throughout the week.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jan-25 | 2.683 | -23.4 |
Mar-25 | 2.444 | -47.3 |
Apr-25 | 2.298 | -61.9 |
Jun-25 | 2.173 | -74.4 |
Jul-25 | 2.131 | -78.6 |
Sep-25 | 2.060 | -85.7 |
Oct-25 | 2.042 | -87.5 |
Dec-25 | 2.017 | -90.0 |
USD: Further upside continuation in the Dollar
- The Dollar was on the front foot in G10, only the Yen was holding onto small gains, albeit by just 0.16%.
- The Dollar is seeing a fresh bid as Europe Joins the session, at a new intraday high against GBP, EUR, SEK, INR, ZAR, MXN, NZD, and the NOK.
- Goldman Sachs has updated its EURUSD forecast and targets parity in 3 Months, {r2} While NAB look for Cable to trade below 1.2100 in the coming days.
- Next immediate support in the EURUSD is right here at 1.0201 61.8% of the Sep ‘22 - Jul ‘23 bull leg.
- For Cable, it is now testing 1.2126 Low Jan 13, and further downside momentum will open to 1.2087 0.764 proj of the Sep 26 - Nov 22 - Dec 6 price swing.
