FREIGHT: 2026 Set to Mark a Record for Tanker Fleet Growth: Kpler

• RES 4: 1.3527 High Oct 1    
• RES 3: 1.3471 High Oct 17  
• RES 2: 1.3456 High Dec 16
• RES 1: 1.3452 61.8% retracement of the Sep 17 - Nov 4 bear leg
• PRICE: 1.3404 @ 16:23 GMT Dec 17
• SUP 1: 1.3312 Low Dec 17
• SUP 2: 1.3290 50-day EMA
• SUP 3: 1.3180 Low Dec 2 
• SUP 4: 1.3125 Low Nov 26      

A bull cycle in GBPUSD remains intact and for now, Wednesday’s sell-off is considered corrective. A fresh cycle high on Tuesday reinforces the bull theme. Attention is on 1.3452 (pierced), 61.8% of the Sep 17 - Nov 4 bear leg. A clear break of this hurdle would strengthen a bull theme and open 1.3527, the Oct 1 high. Initial firm support is 1.3290, the 50-day EMA. A breach of this EMA would highlight a possible reversal.

• PMI surveys had on balance improved although throughout November but gave this back in Tuesday’s preliminary December release to leave implied activity at best similar to that ahead of the late Oct meeting.
• The manufacturing PMI has dipped further to 49.2 in the preliminary Dec reading from 49.6 in Nov and 50 in October, for its lowest since April as it starts to imply contractionary manufacturing again after an average of 49.9 in the previous six months. Context is important though, following heavy declines implied in 2024 (average 45.9) and 2023 (45.0).
• The services PMI had pushed higher again to 53.6 in November (highest since May 2023) but has dipped to 52.6 in the preliminary Dec reading for back to where it was in the flash October reading prior to the October meeting.
• France finally improved in November with a service PMI of 51.4 before holding onto some of this gain at 50.2 in December, the first >50 readings since Aug 2024 but still firmly a laggard in level terms. 

Gilts easily outperformed peers Wednesday as UK CPI came in on the soft side of expectations.

• The UK CPI miss was broad-based, with downside surprises in services, core goods and food inflation contributing to outperformance in the short-end/belly of the curve in early trade.
• Bunds were boosted only briefly by UK developments but weakened throughout most of the session, including a small leg lower on confirmation that the German Bundestag approved a defence procurement package worth E50bln.
• In other data, German IFO Business Climate unexpectedly fell for a second consecutive time in December.
• The UK curve bull steepened on the day, with Germany's bear steepening. Periphery/semi-core spreads closed little changed overall.
• Thursday's focus will be the ECB (MNI preview) and BOE (MNI preview) decisions.
• For the BOE, a 5-4 vote split in favor of a 25bp cut is expected but analysts are split over what happens after December. The ECB is set to hold rates, with attention on the updated macroeconomic projections and the balance of risks to inflation and growth.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.3bps at 2.137%, 5-Yr is up 1.4bps at 2.466%, 10-Yr is up 1.9bps at 2.864%, and 30-Yr is up 1.9bps at 3.485%.
• UK: The 2-Yr yield is down 5.8bps at 3.708%, 5-Yr is down 4.7bps at 3.913%, 10-Yr is down 4.3bps at 4.475%, and 30-Yr is down 3.5bps at 5.223%.
• Italian BTP spread up 0.7bps at 70.5bps / French OAT up 0.5bps at 71bps