MEXICO: Banxico's Heath Continues To Emphasise Concerns On Inflation Risks

Gilts have moved away from lows, with the passage of pricing of the syndicated 5.25% Jan-41 tap (size issued was just above the upper end of our expectations, while pricing was at the tight end of the guidance range) and some stabilisation in wider core global FI markets factoring in over the last couple of hours.

• Next support in futures (90.70) went untested, with the contact basing at 91.21 before a recovery to ~91.50.
• Yields still 0.5-7bp higher, 30s lead the weakness on the day.
• Bears couldn’t force 10-Year yields above the next round number 4.50%, after a ~15bp move off year-to-date lows.
• SONIA futures recover from lows alongside moves further out the curve, last flat to -8.0
• BoE-dated OIS showing ~41.5bp of cuts for the current cycle, with the next 25bp step fully discounted come the end of the June MPC (80% discounted through the end of the April MPC), little changed on the day.
• CPI data is due tomorrow.
• Our macro team notes that there are a number of question marks for the data. The most pressing are 1) when will the survey date be (and what is the impact on air fares) and 2) how much of a rebound there will be from some of the early Black Friday Discounts. In addition to these, accommodation base effects are expected to increase headline CPI (due to weakness in December 2024) while headline CPI is widely expected to see a +0.05ppt contribution from tobacco.

A reminder that it is possible that the US Supreme Court could release its ruling on the legality of the White House's IEEPA (International Emergency Economic Powers Act) tariffs from 10am ET onward, though of course we don't know what opinions SCOTUS is releasing in advance (the last 2 opinion days have come and gone without a tariff case ruling). There is no media embargo for any opinions issued by the Supreme Court and there is no livestream of proceedings; we will be following the release of opinions via Scotusblog's liveblog (link).

• Reminder the first order question is whether it will favor upholding the tariffs (prediction markets see a one-in-three chance the justices will allow them to stand) but there are many permutations, for example striking them down completely and ordering the government to pay refunds retroactively, or allowing the existing revenues to remain but not allow future IEEPA tariffs to be collected.
• The Trump administration plans to begin replacing tariffs with other levies if the Supreme Court finds Trump’s use of IEEPA unlawful.
• If there is no opinion issued today, it would look increasingly likely that a decision may have to wait until at least late February.

• RES 4: 7089.25 1.000 proj of the Dec 18 - 26 - Jan 2 price swing  
• RES 3: 7080.92 0.764 proj of the Nov 21 - Dec 11 - 18 price swing
• RES 2: 7036.74 0.764 proj of the Dec 18 - 26 - Jan 2 price swing
• RES 1: 6954.51/7036.25 20-day EMA / High Jan 13 and bull trigger   
• PRICE: 6876.50 @ 14:33 GMT Jan 21
• SUP 1: 6846.75 Intraday low
• SUP 2: 6809.62 50.0% retracement of the Nov 21 - Jan 13 bull phase 
• SUP 3: 6771.50 Low Dec 18 and a key support   
• SUP 4: 6756.14 61.8% retracement of the Nov 21 - Jan 13 bull phase 

The trend structure in S&P E-Minis is unchanged, it remains bullish and the latest pullback appears to be a correction. However, the contract has traded through support at 6901.43, the 50-day EMA. A clear break of this average strengthens a short-term bearish theme and signals scope for a deeper corrective pullback. This has exposed support at 6771.50, the Dec 18 low. Key resistance and the bull trigger has been defined at 7036.25, Jan 13 high.