Global Rates: Scandi and BoE Central Bank wrap up, UK politics (again)
The desk posits that the recent central bank meetings from the Riskbank, Norges Bank, and Bank of England (BoE) highlight a shifting landscape in global rates amid evolving political dynamics in the UK. Per the full note from J.P. Morgan, commentary from Francis Diamond and Khagendra Gupta underscores the importance of these decisions against the backdrop of UK politics, particularly following the Makerfield by-election. The BoE's stance, potentially tightening policy amid inflation concerns, juxtaposes with dovish tones in the Nordics, suggesting divergent paths for currency valuations. With volatility expected ahead, trader positioning will need to adapt swiftly to such developments.
What the desk is arguing
The desk argues that central banks are navigating a complex interplay of domestic political issues and economic pressures, underscoring different trajectories for monetary policy. The podcast discussion notes that the BoE's recent meetings could lead to shifts in GBP currency dynamics amidst ongoing UK political challenges.
Specifically, they predict that a tightening from the BoE could elevate the GBP, while the more cautious approaches of the Riskbank and Norges Bank might limit SEK and NOK gains, respectively. As inflation exceeds the targets both in the UK and globally, expect heightened market sensitivity to central bank signals.
Where it sits in our coverage
With our covered targets, the consensus for GBP/USD sits at 1.075, with a range of 1.04 to 1.12. Key firms contributing to this view include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) The desk's perspective aligns with jpmorgan, which reflects a bullish stance near the upper end of the consensus range. Conversely, bofa offers a more cautious outlook, suggesting a divergence in trading strategy.
How other firms see it
Firms aligned with a bullish GBP outlook include jpmorgan, advocating for potential gains based on a tightening BoE. On the contrary, bofa leans toward a more bearish stance, anticipating limitations in GBP appreciation.
Related watch-points include the BoE's rate trajectory and its impact on GBP/USD and EUR/GBP dynamics.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01BoE's monetary policy decisions could significantly affect GBP exchange rates.
- 02Norges Bank and Riskbank are taking a more cautious stance, contrasting with the BoE's tightening.
- 03UK political developments remain a central theme influencing market sentiment going forward.
Market implications
Keep an eye on the GBP/USD level at 1.075, as any movement away from this target may indicate shifting trader sentiment based on upcoming geopolitical developments. Additionally, watch for any comments from the BoE that could further clarify rate-hike expectations.
Risks to this view
Risks to this outlook include any unexpected political stability in the UK that could lead to a reversal of the BoE's tightening stance. Additionally, if inflation readings begin to soften unexpectedly, this could prompt a dovish shift from the BoE, undermining the bullish GBP sentiment.
Hi, and welcome to At Any Rate, JPMorgan's global research podcast, where we take a look at some of the drives behind the biggest trends and themes across fixed income, currencies and commodity markets. I'm Francis Diamond, head of European rates strategy at JPMorgan, and today I'm joined by my colleague, Kigendre Gupta, to discuss the Riksbank, Norwich Bank and BOE meetings this week, and also talk, again, about the latest developments in UK politics following the Makefield by-election. So, Kigendre, let's start with the Riksbank, who left the policy rate unchanged at 1.75% this week, with some tweaks to its forecast.
How do you read the Riksbank messaging here on the path of policy rates and what's priced into the market? Thanks, Francis. Yeah, the Riksbank kept rates unchanged and made, as you mentioned, minor tweaks to its forecast.
They now have an explicit hiking bias in the sense that their forecast now shows around 50% probability of a 25 basis point hike by December of this year and a full hike by end of next year. So, these are around, at least in the front end, around five basis point higher relative to the March forecast. In my mind, these divisions were dovish compared to the market expectations, which was pricing almost a full hike by September, October, going into the meeting, and then this pricing has now been pushed still towards late Q4, 26, so well ahead of Riksbank's current guidance.
I think current core inflation, which is measured by CPIF, excluding energy, is around 0.5%, which is a target of 2%, and is expected to stay low for a few months. This is what has given the Riksbank the confidence to stay, or the license to stay on hold for a longer period. Now, of course, this low inflation is fundamentally driven by the VAT cut that was announced this year, earlier this year, and will reverse next year as the base effects kick in.
Like I mentioned, you know, nevertheless, these low contemporaneous inflation affords the Riksbank the luxury of not rushing into a hike, and I think recent developments in the Middle East with declining oil prices has also come to their aid a little bit. I think a hike will eventually come, as energy prices are not expected to go back to pre-war averages, in our mind, and the fact that ECB is raising rates, the Fed has done hawkish, the Nord Stream Bank has also raised rates, and hinted to increase further. All of these will kind of push the Riksbank to deliver a hike.
For now, we think they will hike in December, but as I mentioned, a lot will depend on upcoming inflation trends. Okay, so let's stick with Scandinavia, and you mentioned the Nord Bank in there, in terms of they've already raised rates. They had their meeting this week with the Nord Bank keeping rates on hold at 4.25, but indicated another hike is possibly on the way.
So does this match your view, and how are markets reading the Nord Bank at the moment? Yeah, so like I said, the Nord Bank also kept its policy rates unchanged after having raised last month, which was a surprise move. So on hold this time was not really a surprise, we were barely pricing anything going into the meeting.
They did boost their policy rate forecast higher over the coming months by around, I think, 15 to 20 basis point, as inflation has consistently surprised to the upside over the last few months. I think the delivery this week was broadly along expected lines, although I had personally thought that they would indicate a longer pause at 4.5% in their policy rate forecast. They are currently indicating an almost immediate reversal of the hikes, which is forecasted to be slightly above 4.5%, meaning there is a 20% probability of another hike post a peak of 4.5%.
I think the inflation will remain stickier than the forecast, with further pressure coming via the currency channel, especially against a hawkish Fed backdrop. So our baseline is for them to hike again in September, broadly in line with the Nord Bank's guidance and current market pricing. But I'm also expecting the 2027 FRA curve to steepen, or in other words, expect a longer pause than is currently priced in and guided by the central bank.
Like Riksbank, which we were discussing earlier, I think the next couple of inflation prints will be crucial in determining this, in my view, and as of now, I think the August meeting is also live. It should, again, depend on the inflation prints. Fenton, let's shift to Bank of England for now, who have also kept rates on hold at 3.75% and indicated little urgency for a near-term hike.
Inflation data was softer than expected this week. So do you think they can hike rates at all this year? And if they do, would that be a surprise for the market, in your view?
So as you say, the Bank of England does seem patient for now, but I think ultimately we do expect them to deliver a hike at some point in the latter part of this year. I mean, I think we do acknowledge the softer inflation print this week removes any urgency for the Bank of England to move, but I think the sense is there will be more visible evidence of indirect effects in terms of the impact of higher energy prices earlier in the spring and the impact on the surveys, and particularly the forward-looking wage and price surveys, I think will effectively mean the Bank of England will have to respond and hike later this year. So they do sound patient for now, and it seems they are waiting for clearer evidence of second-round effects, but I think the risks are certainly they don't want to be seen as being too late in tightening policy if inflation pressures are clearly building.
In terms of the vote this week, there were two dissents for a hike, a 25-base point hike from Pill and Green, and actually amongst the members who voted for unchanged rates, the minutes did actually highlight that one member man had noted inflation pressures are prominent but not view a rate hike now as needed. So I think there is a possibility that sort of hawkish, modest hawkish dissent can build if the data warrants on the inflation side going forward. I mean, in terms of the market, as you mentioned there, I mean, the front-end price is around about 15 base points of hikes for September, about 35 base points of hikes for the end of this year in December, and roughly a cumulative 46 base points of hikes by April next year.
So yeah, clearly the expectations for modest tightening, but I think the market is clearly not expecting an imminent rate hike in the next couple of meetings. I mean, it's probably worth noting that front-end pricing is slightly more than our economist view of just one 25-base point hike in November, but I think the lack of visibility around the magnitude and the impact of these indirect effects combined with market expectations of close to 50 base points of Fed hikes priced by next year will probably keep Bank of England rate hike expectations priced by the market close to current levels. Interesting that the cumulative hikes priced for the Soria curve is kind of on par with what is there for the Estor curve as well.
Anyway, let's wrap up with an update on the latest UK political developments. As expected, Andy Burnham won the Maker Field by-election this week. So what do you think comes next?
And do you think markets price any risk premia for political uncertainty? So just to recap, I mean, yes, Andy Burnham, as you say, won the Maker Field by-election. He had a pretty large 55% share of the vote.
That was on turnout of just above 58%. And a 9,231 majority over Reform UK who came in second. So that majority is actually bigger than the 5,000 margin of victory that Labour enjoyed in Maker Field in the 2024 general election.
So yeah, a strong result there. I mean, if you look at the market moves, guilt yields are higher pretty much across the curve on Friday. But really, that's more reflective of the fact we've seen a sell-off in Bunz and a bit of geopolitical noise around the Iran-US deal on the media-wise rather than the Burnham by-election victory, I think, to be honest.
And when we actually try to look at our kind of measure the risk premium, i.e. the two cents curve, I mean, it has steepened, but rather by the basis point. And 10-year guilt spot spreads, they're not really very moved today. So I don't think there's a huge clear impact from the by-election on the market in that sort of sense.
So as you said, what comes next? Well, this does open the door for Burnham to eventually become prime minister. But exactly what those next steps are, to be honest, are unclear here.
I mean, there are media reports suggesting Burnham will wait and probably doesn't have an intention of launching a leadership challenge in the next few days. With a sense he may well try and encourage Starmer to set up a timetable for a more orderly departure as Labour leader and prime minister. In that case, it may take several weeks to sort of get clarity and see exactly Burnham being put in the position of prime minister, but it would also avoid the need for a formal leadership contest.
However, there are other reports in the media in terms of Starmer indicating he would look to stand in any leadership contest. And if this were to happen, and he were to fight against Burnham, and possibly other challenges may appear, if they can muster enough support, any contest that is going through the Labour sort of leadership process and ballots would probably last several months. But I think overall, in our view, if that were to be the case, and we were to get either relatively sort of swift and orderly departure or a leadership contest that takes several months, I think the likelihood there's a significant increased risk premium priced into UK yield is probably low.
I think the sense would be whichever route is taken, Burnham would most likely win and become prime minister. But I think there's always a bit of uncertainty in terms of if there is a formal leadership contest, does that process require Burnham to be a bit more detailed on his overall vision and policy framework? That might be the case, but even so, it's probably unlikely he'd provide a lot of insight on fiscal policy shifts, and that's really what the market would be interested in, any implications of fiscal policy.
So overall, I think we see a high likelihood that probably Burnham will be installed as prime minister in time for the Labour Party conference in September. But I think for now, we just don't expect a lot of visibility on any fiscal policy implications till we get much closer to an autumn budget, which maybe is sort of October, November time. And I think when we look at the two's tens, guilt curve, yes, it's a bit steep on the relative value basis when we adjust the front end rates, but it's not particularly excessive.
And I don't think we expect any significant increase in political or fiscal term premium to be brightened to the curve just yet. So thanks for listening, and thanks again for joining. That's all from us.
Stay tuned for more updates on the fixed income space here on At Any Rate, J. Morgan's global research podcast series. This communication is provided for information purposes only.
Please read J. Morgan research reports related to its contents for more information, including important disclosures. Copyright 2026, J.
Morgan Chase & Co., all rights reserved. This episode was recorded on 19th of June, 2026.
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