CZK: Above-Forecast Wage Print Supports Cautious CNB Stance

Gilts remain lower on the day.

• Pressure was seen ahead of the GBP4.25bln auction of the 4.375% Mar-30 gilt, adding to weakness that stemmed from Canada & Mexico’s short-term U.S. tariff reprieve.
• Mixed auction results failed to provide any lasting support.
• Gilt futures as low as 92.45 post-auction before a recovery to 92.55.
• Initial support located at the 20-day EMA (92.11).
• Yields 3.5-6.0bp higher across the curve, 5s lead the sell off
• 10-Year spread to Bunds ~2.5bp wider at 212.3bp, next upside level at the Jan 20 close (213.3bp).
• Hawkish adjustments in GBP STIRs as gilts soften.
• 23.5bp of cuts priced for this week’s BoE decision (our preview will be published later today), 47bp of cuts showing through May.
• We look for 25bp cuts at both of those meetings.
• 78bp of cuts priced through December vs. ~80bp late yesterday.
• We believe that more data is needed before we can give a meaningful view on monetary policy beyond the Bank’s May meeting.
• SONIA futures little changed to -7.5.
• December highs in SFIZ5 remain untested.
• The recent run of dovish repricing may have reached its limit, unless we get a fresh catalyst.
• A limited UK calendar will leave focus on cross-asset cues and tariff-related headlines.

• JPY is slipping against most others in G10, pressed by a modest recovery in core European equities on the back of the Canadian/Mexican tariff reprieves. CHF, however, is firmer - showing that haven flows remain inconsistent. This keeps USD/JPY just above the 50-dma, however recoveries are capped by the 156.29 mark - the 50% retracement of the downleg off the YTD high.
• US JOLTS jobs data is set to cross later today, alongside the final durable goods report for December, but it's headline risk surrounding tariffs that will likely remain the key driver of sentiment. Both Mexico and Canada secured last minute reprieves on universal 25% import tariffs, allowing governments a month for negotiations to avoid full installation in March.
• China are yet to secure the same - and have announced plans for a 10% levy on US energy imports as a counteractive measure. It's these tariffs that will remain a focus for markets ahead. We wrote on Friday that CNH downside could be limited through this first  phase of tariffs, as the reaction function of the Chinese authorities remains  key. MNI wrote on January 17th that the PBOC will limit any sharp  depreciation of the CNY in response to tariff uncertainties as sharp CNY  depreciation will worsen capital outflows and impede monetary and fiscal  policy coordination.
• As such, CNH downside could be limited over the short-term - price action  that would work against options market pricing that increasingly favours  USD/CNH calls. As such, collecting premiums via selling USD/CNH topside would  stand to benefit.

• In the equity space, the S&P E-Minis contract started the week on a bearish note. The gap lower Monday and a breach of support at 5948.00, the Jan 27 low, strengthens a bearish threat and cancels - for now - a recent bullish theme. An extension down would open 5892.37, 76.4% retracement of the Aug 5 - Dec 6 bull leg. Initial resistance is at 6069.00, today’s intraday high. Gains are considered corrective, however, a stronger rally would expose key resistance at 6178.75, the Dec 6 high.
• A sharp reversal lower in the EUROSTOXX 50 futures contract on Monday signals the end of the recent bull run - for now - and the start of a corrective cycle. Price gapped lower and traded through the 20-day EMA, at 5159.26. A continuation of the bear leg would pave the way for a move towards the 50-day EMA, at 5056.82. On the upside, key resistance and the bull trigger has been defined at 5327.00, the Jan 31 high.