ILS: Shekel Extends Losses Amid Ceasefire Uncertainty

Gilts remain under pressure, with Chancellor Reeves’ weekend comments doing little to promote confidence.

• Futures breach initial support at last week’s low (89.00), basing at 88.96, before a bounce to 89.25 last.
• Yields little changed to 4bp higher, 50s relatively resolute.
• 10s as high as 4.901% this morning vs. last week’s high of 4.921%.
• 30s got near last week’s multi-decade high (5.473%), topping out at 5.469%.
• 10-Year gilt/Bunds little changed on the day, around 225bp.
• BoE-dated OIS shows 46bp of cuts through year-end vs. 49bp late on Friday. Last week’s extremes of ~39bp untested.
• SONIA futures 0.5-5.5 lower, last week’s lows intact.
• GBP750mln of short-dated APF sales from the BoE due this afternoon.
• CPI data (Wednesday) headlines the domestic calendar this week. That reading will be much more consequential for markets than the monthly GDP (Thursday) and retail sales (Friday) data.
• We will provide the usual data preview and review around the CPI release.
• Comments from BoE dovish dissenter Taylor (Wednesday) also eyed.

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• The continued post-NFP themes of a weaker Euro and Pound have continued early Monday. Weak risk sentiment continues to boost the Japanese yen, prompting some significant declines for cross/JPY to start the week.
• EURUSD has traded below the 1.02 handle, registering fresh cycle lows for the pair at 1.0178. Higher European NatGas prices are providing additional single currency headwinds, as equity weakness particularly weighs on EURJPY, down 0.70% on the session with the 160.00 mark supporting for now.
• With the bearish EURUSD trend sequence intact, analysts will now look to 1.0138, the 1.764 projection of the Sep 25 - Oct 23 - Nov 5 price swing as the next target for the move.
• For sterling, 1.2100 has so far held for cable, however the pair is down 0.85% as the negative backdrop for UK assets continues to permeate. We highlighted last week how 190.60 was the first major target for the move in GBPJPY, a trendline drawn from the Aug low. This trendline has been pierced, with the pullback from the Dec 30 highs briefly extending to 4.5%. Given this development, 188.09 will now be in focus, the Dec 03 low.
• Overall, the USD index is up 0.3% since the open having printed a fresh two-year high above 110.00.
• US Federal Budget balance data highlights a light Monday schedule. US PPI will cross Tuesday before UK and US CPI data on Wednesday.