OIL: Shandong Teapot Inventory Rate Falls on Week: OilChem

• Treasuries have pulled away from highs in latest trade, but the broad story remains being dragged higher by Gilts after softer than expected UK CPI inflation along with a more marginal tailwind from lower oil futures.
• Today’s macro docket is relatively light, led by the final input for core PCE inflation, with greater focus on tomorrow’s retail sales report.
• The quiet session should keep earnings in focus in the interim, with Morgan Stanley, Abbott Laboratories and Prologis reporting before the open, before Harris’ interview on Fox after the close.
• Cash yields are 2-2.5bp lower across the curve, with 2s10s at 8.7bps consolidating yesterday’s sizeable flattening but still within ranges over the past month.
• TYZ4 is 1+ ticks below earlier highs of 112-20 (+ 06) on modest cumulative volumes of 280k.
• It stopped shy of initial resistance at 112-21 (Oct 9 high) after which lies 113-12 (Sep 3 low), but gains are considered corrective with support seen at 111-22 (Oct 10 low).  
• Data: MBA mortgage data (0700ET), International prices Sep (0830ET), NY Fed services Oct (0830ET)
• Bill issuance: US Tsy to sell $64B 17-w bills (1130ET)
• Politics: VP Harris interview on Fox (1800ET)

• GBP's post-CPI break lower represents the second meaningful range breakout so far this week, with EuroStoxx50 future weakness also putting prices below the 4929.00 October low on the back of poorly received LVMH and ASML earnings over the past 24 hours.
• The next focus for G10 FX will be the sustainability of the next GBP leg lower. Two-week vols today capture the first post-UK budget options expiry - which appears to have arrested the decline in vols for GBP against both the USD and EUR - but GBP/USD vol skews in favour of three-week contracts - meaning markets apportion a greater risk of spot vol following the US election, rather than the first Labour budget, despite the up-rating of the black hole in UK finances to £40bln yesterday.
• Options-implied probability looks for a 44% chance of GBP/USD below 1.30 on the session following the Presidential election (28% below 1.29, 16% below 1.28), up from 39% this time last week. This leaves the 100-dma as a key litmus test for weakness, today crossing at 1.2954.
• We don’t think the BoE will entertain the idea of a 50bp cut as a direct result of this morning's CPI print, given still elevated (but cooling) wage growth and services inflation, which leaves the profile of cuts through to H2'25 still quite flat, despite today’s repricing.

SX5E (20th Dec) 4900/4500ps 1x2, bought for 45.5 in 6k.