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European yields closed mixed Wednesday.

• UK CPI brought upside surprises to the BoE's headline expectation and to services CPI, but underlying metrics looked tamer - overall there didn't appear to be any material change in the likelihood of BOE easing.
• The report had little impact on the UK curve though there was a marginal (1bp) increase in March BOE cut pricing.
• The other major news of the morning was an FT report that ECB President Lagarde will vacate her position before her term ends in October 2027, though the ECB noted Lagarde hasn't taken any decision and again this had little impact on pricing.
• Elsewhere, French final January HICP confirmed flash estimates.
• On the day, Gilts slightly outperformed Bunds across the curve.
• With Bunds basically flat, periphery/semi-core EGB spreads tightened very modestly.
• Thursday brings the ECB Economic Bulletin and the UK CBI report. Friday's flash PMIs and UK retail sales readings are the data highlights remaining this week.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.2bps at 2.048%, 5-Yr is up 0.6bps at 2.334%, 10-Yr is up 0.1bps at 2.739%, and 30-Yr is unchanged at 3.405%.
• UK: The 2-Yr yield is down 0.4bps at 3.583%, 5-Yr is up 0.2bps at 3.799%, 10-Yr is down 0.2bps at 4.374%, and 30-Yr is down 1.1bps at 5.17%.
• Italian BTP spread down 0.6bps at 60.6bps / French OAT down 0.7bps at 57bps  

• RES 4: 1.3868 High Jan 27 and the bull trigger    
• RES 3: 1.3814 High Jan 30
• RES 2: 1.3733 High Feb 4  
• RES 1: 1.3613/3712 20-day EMA / High Feb 11
• PRICE: 1.3548 @ 16:21 GMT Feb 18
• SUP 1: 1.3532 50-day EMA
• SUP 2: 1.3496 Low Feb 17
• SUP 3: 1.3458 76.4% retracement of the Jan 19 - 27 upleg 
• SUP 4: 1.3402 Low Jan 22  

GBPUSD sold off sharply Tuesday resulting in a show below key support around the 50-day EMA, at 1.3531. A clear break of this average would undermine the bull theme and highlight scope for a stronger retracement. This would open 1.3458, a Fibonacci retracement. It is still possible that the latest pullback is a correction. Key short-term resistance to watch is 1.3712, the Feb 11 high. Clearance of this hurdle would be a bullish development.

• Fed Funds implied rates have pared earlier increases for nearer-term meetings, back to unchanged for the June FOMC despite a continued push higher in WTI futures (1st contract now +4.6%), but are 2bp higher for the Dec FOMC.
• Cumulative cuts 1.5bp Mar, 6bp Apr, 19.5bp Jun, 29bp Jul, 42bp Sep, 50bp Oct and 58bp Dec.
• SOFR futures range from 0.5-4 ticks lower looking to end-2027, with a terminal implied yield of 3.065% (H7, +3.5bp) for a little further from Friday's 3.005% lowest close since late November.
• Today’s data releases saw upside surprises for core durable goods orders, housing starts/building permits and IP. Despite that, the Atlanta Fed’s GDPNow for Q4 was unchanged at 3.6% annualized although the composition was a little more solid.
• As noted above, the FOMC minutes are still to come at 1400ET. Preview: https://mni.marketnews.com/4kI6WzS
• Fed VC Supervision Bowman (voter, dove) is also currently speaking in a discussion on supervision and regulation. She said on Monday that Friday's inflation data were "a little softer" than most expected but in line with her expectations. "Since I see the current policy stance as moderately restrictive, I do think there's room for at least 75bp of more cuts in 2026 […] that's what I wrote into my forecasts last December".