Well, the softer UK inflation data here raises the odds of the BOE joining the ranks of the Fed and ECB into pausing but not after one last rate hike this week in all likelihood. The odds of a 25 bps move coming into today was at ~80% and while traders may pull back slightly on that, I still see policymakers delivering one final message before heading to the sidelines.
The initial verdict is one that sees equities cheer a little, with US futures paring marginal losses to turn flat on the day:
S&P 500 futures
European futures are also now slightly higher as regional bond yields are likely to fall. We’re already seeing that in Treasury yields, with 10-year yields easing from around 4.365% to 4.356% now.
The change isn’t too much as we need to consider that markets have largely already adopted the view that the BOE will likely perform a one and done case this week. As such, the inflation numbers only serve to vindicate that sentiment but it definitely builds a strong case for no further rate hikes down the road so long as the trend remains on the current trajectory.