GILTS: Curve Twist Steepens, Fed & Bunds Drive Moves

SX7E (19th Dec) 190p, bought for 0.30 in 15k.

• Softer-than-expected UK labour market data has prompted December BoE cut pricing to reach ~80%, and in tandem has provided some renewed pessimism for GBP which sits at the bottom of the G10 leaderboard.
• Downward pressure for GBPUSD (-0.33%) looks set to snap a 4-day winning streak, which saw the pair meaningfully correct from recent cycle lows of 1.3010 to 1.3191 highs on Monday. The bounce fell short of initial resistance at 1.3231, the 20-day EMA. Moving average indicators continue to signal a bearish trend, potentially strengthening the narrative that recent gains could be considered corrective.
• Sterling weakness even more notable in the cross, with EURGBP rising 0.45% to 0.8812 at typing. Once again, dips remain very well supported around the prior breakout level at 0.8769, highlighting the dominant uptrend. Topside targets remain at 0.8835 and 0.8875, the April 2023 high.
• It’s well documented that BoE Governor Bailey is viewed as the key swing vote and this morning’s data increases the odds of him opting to cut next month. However, it is worth noting there will be one more labour market print and two CPI releases before the next decision. With the other 8 MPC members having entrenched views, GBP volatility around non-Bailey speeches is likely to be much reduced ahead of the budget on Nov 26.

• MNI: GERMANY ZEW NOV ECONOMIC EXPECTATIONS 38.5
• GERMANY ZEW NOV CURRENT CONDITIONS -78.7