US: FED Reverse Repo Operation: Declining Usage

• RES 4: 1.3048 High Nov 6 and a key resistance
• RES 3: 1.2961 50.0% retracement of the Sep 26 - Nov 22 bear leg  
• RES 2: 1.2811 High Dec 6 and a short-term bull trigger 
• RES 1: 1.2716 20-day EMA 
• PRICE: 1.2686 @ 16:38 GMT Dec 16 
• SUP 1: 1.2609/2487 Low Dec 13 / Low Nov 22 and the bear trigger   
• SUP 2: 1.2446 Low May 9
• SUP 3. 1.2367 76.4% retracement of the Oct 4 ‘23 - Sep 26 uptrend 
• SUP 4: 1.2300 Low Apr 22 and a key support     

GBPUSD traded lower again Friday, extending the pullback from its recent high. The trend condition remains bearish and recent gains appear to have been a correction. The recovery allowed an oversold condition to unwind. Key resistance to monitor is 1.2813, the 50-day EMA. Support has been cleared at 1.2617, Dec 2 low. This exposes the bear trigger at 1.2487, the Nov 22 low.   

• CANADA STILL INTENDS TO RELEASE BUDGET UPDATE AROUND 4PM EST

Gilts underperformed Bunds Monday at the start of a busy week on the UK calendar.

• December flash PMIs were the session's focus, and both the Eurozone and UK readings proved mixed (manufacturing weaker, services rebounding), though there was only limited lasting hawkish reaction to evidence of inflation pressures.
• Global core FI weakened in the afternoon on strong US Services PMI data and a modest rebound in oil prices, with Gilts hardest-hit. Chancellor Scholz's government lost its vote of confidence as expected, setting up early German elections on 23 Feb.
• ECB's Schnabel echoed the broader Governing Council's view that further easing toward neutral is appropriate, though again she did not sound supportive of easing past neutral. Earlier, ECB's Wunsch had similar sentiments.
• The UK curve bear flattened on the day, with Germany's twist steepening.
• Periphery EGB spreads widened, and while French spreads did too the move was contained given the sovereign's downgrade late Friday.
• The week's Europe highlight is the Bank of England decision released Thursday - as our preview of this week's CPI and Labour Market data (PDF) noted, unless there are absolutely huge surprises in thew data, it looks very likely that Bank Rate will be left on hold. Tuesday sees the Labour Market data, as well as German IFO/ZEW.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.1bps at 2.05%, 5-Yr is down 1.7bps at 2.071%, 10-Yr is down 1bps at 2.247%, and 30-Yr is up 0.4bps at 2.483%.
• UK: The 2-Yr yield is up 4.9bps at 4.357%, 5-Yr is up 4.5bps at 4.28%, 10-Yr is up 3bps at 4.442%, and 30-Yr is up 2.1bps at 4.988%.
• Italian BTP spread up 1.8bps at 115.4bps / French OAT up 1.5bps at 79.9bps