Short weekly notes on fixed-income and FX markets.
10-year gilt yields closed at 3.82 % on Friday, reversing Thursday's mini-spike. Market pricing now implies two BoE cuts before year-end, down from three at the March peak.
We stay neutral on duration. Sterling carry trades remain attractive against the euro, but the CPI print on Wednesday is a coin flip — consensus sees core at 3.1 %, range 2.8–3.4 %.
Pair traded 156 intraday before fading to 154.2. MoF verbal intervention has lost bite at this level; the next meaningful tool is actual yen-buying, which rarely comes before 158.
We remain long USD/JPY tactically, stop at 153.4, with the view that any intervention-driven dip is a buy back toward 157.
MXN, BRL and INR have all outperformed YTD on the back of soft-landing US data. We see diminishing marginal return from here and are reducing carry exposure to half-weight.