GBP: Rate expectations firming up Expect Bank of England rate expectations to be influenced primarily by the Fed and US data today, as domestic drivers will be quite scarce. The UK calendar includes only some lending figures for March, housing figures for April and the final PMI report, while BoE officials will not be able to comment on monetary policy as the pre-meeting quiet period starts. The recent rollercoaster in BoE policy comments and a substantial repricing higher in US rates have left the Sonia curve attached (21bp) to the prospect of an August rate cut, but also signal market reluctance to price in additional cuts (44bp of easing by December). That might be leaving sterling in a stronger position than the euro this week – especially considering EUR downside risk for EZ inflation – but we still believe EUR/GBP will ultimately find a more stable upward path as investors price in larger BoE cuts. For now, the pair has erased almost all recent gains and can push back below 0.8550.