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Gilt futures have been happy to follow US Treasuries this morning, with today’s domestic calendar empty. A reminder that ICE futures/options markets will close at 12:15 London today, with the exchange closed on Thursday 1 January 2026.

• Gilts are +8 ticks at 91.29, with yesterday’s 91.39 high unchallenged. Our technical analyst notes that recent price action highlights the Dec 16 low (90.50), and the Nov 27 high (91.93) as the important short-term directional triggers.
• The curve is marginally bull steeper, with 2-year yields down almost 2bps and 10-30-year yields down ~1.3bps.
• 10-year yields are currently at 4.485%, still hovering close to the bottom of a trendline drawn from the November 2022 low. Interaction with this trendline will be key heading into next year.
• SONIA futures are flat to +2.0 ticks through the blues, with the reds/greens leading.
• BOE-dated OIS almost fully price the next 25bp cut through April 2026, with just over 40bps of easing priced through year-end.
• The guidance tweaks at the December BOE decision have raised the bar to a February cut. We’d likely need to see notable downside surprises in inflation, labour market and survey data for a cut to be realised.
• For those who fancy some NYE reading in the meantime, see our latest BOE and UK inflation/labour market reviews here:
  • BOE review
  • Inflation/labour market review

Figure 1: 10-year Gilt Yields Since 2022 (Source: Bloomberg Finance L.P)

The aforementioned (light) uptick in the dollar index sees both GBPUSD and EURUSD register fresh session lows, both down 0.2% at typing.

• GBPUSD now trades at 1.3443, through yesterday’s low and narrowing the gap to support at 1.3409 (20-day EMA). However, clearance of firm support at 1.3348 (50-day EMA) is required to counter the current bullish trend condition.
• EURUSD meanwhile is testing the 20-day EMA of 1.1724. A clear breach of this average would signal scope for a deeper retracement, allowing an overbought condition to unwind.

The Bloomberg dollar index is re-testing earlier session highs of 1204.3,  currently +0.1% today. A pullback in US yields after China announced additional tariffs on beef imports has had a limited impact on FX markets, with aggregate activity contained given the NYE holiday in several countries. A higher close for the BBDXY today would mark a fourth consecutive positive session, although resistance levels at 1205.4 (Dex 23 high) and 1207.5 (20-day EMA) remain intact.

• The Kiwi underperforms the G10 basket, with NZDUSD down 0.4% at typing. The pair is testing support at the 50-day EMA of 0.5766, clearance of which would expose the December 19 low of 0.5736.
• Meanwhile is AUDUSD, focus remains on the psychological 1.16 figure (currently +0.2% at 1.1585).
• Both USDCNH and USDCNY are hovering just below the 7.0000 figure. Overnight, the official Chinese manufacturing and non-manufacturing PMIs for December were stronger-than-expected, inching into expansionary territory.
• The USD/CNY fix printed at 7.0288, while the BBG market consensus was below the 7.00 level at 6.9966. The USD/CNY fixing was below yesterday’s and last week’s levels resuming the downtrend. We wrote yesterday that Authorities may act to slow any acceleration in the downtrend, but the outlook for CNY remains positive, with markets almost uniformly looking for USDCNY further below 7.00 in 2026. See here: https://www.mnimarkets.com/articles/higher-usdcny-fix-only-provides-temporary-support-before-new-lows-1767082916217
• Today’s European session is very quiet, with only UK markets open for a half day. Focus this afternoon is on the US weekly jobless claims release.