CONSUMER STAPLES: Carrefour; 5.4Y FV

{GB} GILTS: Gilts fade the initial CPI-driven bid, as bearish technicals reassert themselves and oil ticks higher.

• Gilt futures through round number support at 93.00, last 92.90.
• Next support at a Fibonacci projection (92.78).
• Yields 0.5bp lower to 2bp higher, curve twist steepens.
• 30s consolidating the recent break break above 5.00%. Benchmark still ~15bp below ’23 highs, last 5.06%.
• 10s last 4.54%, November 14 high (4.566%) still untested.
• Early outperformance vs. Bunds fades, spread now only 0.5bp narrower on the day at 228.7bp. Yesterday saw the highest close for the spread since 1990.
• SONIA Dec ’25 BoE dated OIS/SFIZ5 futures operate around recent hawkish extremes with today’s inline to marginally softer-than-expected CPI data having little lasting impact, likely as the “surprises” within the data shouldn’t have too much of a bearing on monetary policy.
• BoE-dated OIS prices 55bp of cuts through ’25.
• SFIZ5 a little above triple bottom support that was printed in early to mid-November.
• Macro and cross-market cues set to dominate during the remainder of the day.
• Final ’24 BoE decision due tomorrow, click for our full preview.

Q: The Bundesbank last week in its forecast sketched out an impact on the German economy of a tariff scenario, which would tip it into a slight contraction. How do you see that for the Eurozone?

• Lane: This is why we made these observations in the monetary policy statement. Most of the time, it will be a downside for GDP, so we are clear on that. For inflation, there are many ancillary assumptions you have to make, so the impact is uncertain. The Bundesbank report makes a set of assumptions there.
• We have a good machine to run many scenarios, but it is not productive to work on that now. Once we have a clearer picture, we can assess the scenario in concrete and incorporate it into our assessment.

Q: In the event of increased tariffs, would the ECB welcome a depreciation in the Euro to increase competitiveness

• Lane: We will assess this on the impact it has on price stability. We take a general equilibrium view of the exchange rate. It is important to think about trade-weighted exchange rates rather than e.g. EURUSD. It matters quite a lot about how firms everywhere make pass-through decisions.

• AUD and the Kiwi are still the worst performers in G10s against the Dollar, and both Currencies are extending further lows, a continuation from the Overnight session into the European hours.
• While the moves aren't too fast and more of a 1 pip at a time drag, AUDUSD now look to test the next immediate hurdle at 0.6300.
• EURAUD also targets the Immediate September high situated at 1.6647, and further upside momentum will open to 1.6682.
• NZD still eye 0.5700 next, so far only managed a 0.5723 low.