Analysts at TD Securities note that this morning's UK data and BoE comments reinforced the market's recent dovish tone.

• "December CPI surprised to the downside, with the headline at 1.3% y/y (mkt 1.5%), and core CPI at 1.4% y/y (mkt 1.7%). Services CPI fell to 2.1% y/y, its weakest rate in the history of the data going back to 1988. There were three prior instances of 2.1% prints, but those were all March/April readings and skewed by Easter effects. The most notable weak spot in services was in hotels, where after a sharp decline in November and December, the y/y rate has swung from 4.5% y/y in October to -2.2% y/y now. While we had initially thought that the inflation data wouldn't be watched all that closely by the BoE, the weakness in the December data was significant enough to get a bit more attention than usual.
• This morning we also heard from the BoE's Saunders, who was firmly in the dovish camp, as we would have expected after having voted for rate cuts at the last two meetings already. He has a very bearish view of the UK economy from here, and said that it would take a "big bounce" to get UK growth back to potential."