US 10YR FUTURE TECHS: (H6) Bear Threat Remains Present

Portugal HICP accelerated to 2.4% Y/Y in December according to the Statistics Portugal flash release (2.1% November).

• The national-level CPI (non-HICP) meanwhile was almost stable this time, at 2.19% (2.21% November). Discrepancies in the annual rates between CPI and HICP can often be related to owners equivalent rents or package holidays, but the lack of details in today's Portugal release makes this rather tricky. Looking CPI, for which the statistics agency publishes some, limited, details:
• Core (excl. unproc. food and energy) saw some moderate acceleration Y/Y, to 2.06% from 1.96% in November.
• "The annual rate of change of the index for energy products decreased to -2.4% (-0.8% in November)"
• Food was mixed this time, with unprocessed food further accelerating (6.02% Dec vs 5.95% Nov) while processed food was lower than before (0.93% vs 1.15% prior).
• For reference, Portugal contributes 2.6% to the overall Eurozone HICP 2025 basket.
• The print comes after Spain HICP came in in line with expectations, at 3.0% Y/Y, down from 3.2% while Belgium HICP decelerated by 0.4pp to 2.2% (no consensus).
• France will be the next country to follow with national-level flash December HICP data, scheduled for next Tuesday, January 6.

GBPUSD has struggled to recovery meaningfully from earlier session lows, in contrast to EURUSD. That helped EURGBP briefly test Monday’s 0.8740 high. A move towards and through the 50-day EMA of 0.8749 would counter the current bear cycle in EURGBP. 

• There are a few factors which could support EURGBP upside in the coming months.
• First, the bar to renewed dovish front-end repricing appears to be lower for the BOE than the ECB (despite some hawkish tweaks to the BOE’s December guidance).  Eurozone growth momentum has been improving in recent months, while UK signals (e.g. from the labour market) remain soft.
• Second. The UK political situation still presents risks. Although sterling has recovered well since the Autumn budget, the May local elections present the next major test for the Labour party. A poor showing would place increasing pressure on PM Starmer and Chancellor Reeves.

US E-mini futures have been biased lower through today’s session, narrowing the gap to support at the 20-day EMA (6909.50) and the December 19 high (6895.25). Futures have struggled to consolidate above the 7,000 figure in recent weeks. 

• Analysts are almost universally bullish on the S&P 500’s prospects next year. A Bloomberg survey comprising 21 estimates had a median end-2026 forecast of 7,500 (low: 7,000; high: 8,100).
• Key focus in the year-ahead will naturally be on the sustainability of AI and AI-adjacent companies’ valuations, with increasing scrutiny on the profitability of substantial capex investments.
• Elsewhere, the path for Fed policy remains uncertain. The key paragraph in yesterday’s December meeting minutes indicated (as did the meeting Dot Plot) a sizeable minority of members seeing no further easing through end-2026, but a base case among a solid if narrow majority that further limited cuts would ensue if the data cooperate.
• Finally, US tax rebates embedded in the OBBBA may provide a tailwind to consumption in the first half of next year, potentially supporting more domestically-sensitive equities that have struggled in 2025..
• The geopolitical environment and volatility in US government policy will present ongoing headline risks to digest.