EU CREDIT RATING: CREDIT RATING: Celanese Cut by S&P

Gilts rally on the back of the softer-than-expected CPI data detailed in earlier bullets.

• Futures as high as 97.75 before easing back to ~97.60.
• Yields 4-9bp higher, curve bull steepens on the dovish BoE repricing.
• 2s10s and 5s30s still shy of multi-week highs.
• BoE-dated OIS hold the bulk of the early dovish move, showing ~24.5bp of cuts for November, 41.5bp of cuts through December and 114bp of cuts through June.
• SONIA futures remain underpinned but trade off session highs, 1.5-12.5 firmer vs. settlement.
• Upside expressions favoured in SONIA options (detailed in a recent bullet).
• Digestion of the CPI data is set to dominate through the morning.
• We have already noted that we don't think this data opens up the prospect of a 50bp cut any time soon.
• We would only really view the data as a marginal downside surprise on an underlying basis and we think that markets will probably overreact in the short-term.
• Outside of the CPI data, various source reports have pointed to GBP40bln of tax hikes and spending cuts in this month’s Budget,
• Elsewhere, GBP3.5bln of 4.00% Oct-31 gilt supply is due this morning.

• RES 4: 1.3434 High Sep 26 and key resistance 
• RES 3: 1.3389 High Oct 1 
• RES 2: 1.3305 High Oct 2  and the bull trigger
• RES 1: 1.3077/3151 Intraday high / 20-day EMA
• PRICE: 1.2991 @ 08:12 BST Oct 16
• SUP 1: 1.2983 Intraday low 
• SUP 2: 1.2959 61.8% retracement of the Aug 8 - Sep 25 bull leg  
• SUP 3: 1.2890 Low Aug 18
• SUP 4: 1.2846 76.4% retracement of the Aug 8 - Sep 25 bull leg

GBPUSD is trading lower today, marking the end of the recent consolidation phase. The break lower also confirms a resumption of the current bear cycle. Note that an important support at 1.3002, the Sep 11 low, has been breached. This also reinforces the bear theme and opens 1.2959, a Fibonacci retracement point. On the upside, initial resistance to watch is 1.3151, the 20-day EMA. A clear breach of this average would signal a reversal.