 Hey everyone, this is Mike Kramer of Mock capital with a weekly check and following CPI for the UK came in hotter than expected rising At 8.7 percent year over year 0.7 percent month over month both easily beat expectations core came in at 7.1 percent Easily beat expectations and was also higher than last month's reading So certainly when you look at this data point it certainly would indicate that the BOE is probably not done raising rates yet And in fact you're seeing this being reflected in the pricing by the market The terminal rate right now is priced to rise to 5.96 percent by February of 24 It's also important as the market is increasing the bets that the BOE actually raises by almost 50 basis points tomorrow It's obviously not a done deal because you can see the implied rate is a plus 32 basis points So that would imply just a little bit more than 25 But certainly this is a big change from where you know markets have been expecting just a couple of days ago When they were seeing just maybe a 25 basis point rate hike So this data certainly increases the odds that you could get a 50 basis point rate hike tomorrow And what we're seeing really taking place in the bond market is very telling you can see that the Front of the curve on the two years rising rather dramatically Back above the highs that we saw in September We're trading well above those levels now with the with the British two-year trading above 5% When we look at the momentum on the British two-year you can see that that has clearly been positive and it's very strong This would suggest that there's probably still further upside in the British to also you can see your your uptrend right here So this makes a fairly complex situation because Clearly the BOE is going to have to continue to put upward pressure on Rates but at some point how far the rates need to rise to get inflation down And what damage does that do to the economy? And you can see that playing out through the guilt curve with the British two-year up 11 the 10 year up 8 and the 30 year Up 8 and when you look at the 30 year on the technical chart You can see that this did not surpass the September and October highs yet and nor did the nor did the British 10 year and it's looks almost as if there's a Rising wedge pattern forming in the British 10 year which suggests that there's potentially a little bit more upside But also the risk for a reversal and a move down Seems to be forming and one reason why this may be is because if they can if the if the BOE continues to raise rates aggressively What does that mean for the long-term growth prospects of the country given that it probably increases the odds of Recession and maybe even stagflation really beginning to hit hard on the economy And this is something that we need to keep an eye on because if you continue to see rates on the short end Rise much faster than that on the long end Or you were to even see the long end begin to break down This will clearly be more of a recessionary signal and something that needs to be watched Because that wouldn't obviously be good for the equity market But what you are seeing right now again is that there is potential for some further upside in in the British to 10 year And there's also potentially some room for further upside in the British two year while you're watching your trend line here When you look at the British pound and see this initially rallied and then reversed hard against the US dollar again, this is a potentially a sign that The market is becoming a little bit more concerned about the potential for recession risk and is now beginning to look past the interest rate differentials Because clearly if you look at the US two year today, that's trading up as well, but only by Two basis points compared to it an 11 basis point increase and one would expect that given that the Rates in the in the UK are up substantially higher and the spread between the two or is widening That you would see the pound strengthening, but instead you're seeing the pound weakening And this is indicative of a market that perhaps is beginning to think about Recession odds and so what this means is that we're watching support levels and resistance levels very carefully because if you were to break below 126 on the pound or this 126 region right in here This would obviously set up a further drop to 125 or so Meanwhile, if you can hold the support zone between 126 it increases the likelihood of moving back up towards 128 but it also probably indicates that if You're beginning to see the pound weaken You're gonna likely see the UK footsie begin to weaken as well because that's gonna be indicative again of increasing recession risk due to high interest rates stifling the economy and Again, you can see here on the UK footsie There's a very very nice downtrend in place the RSI isn't quite oversold yet So momentum is clearly turned negative for the index itself with the RSI trending lower And you can see that the footsie is basically Continuing to just trace out along this downtrend after breaking through this flag pattern And what's also interesting is at this morning when the market initially opened there was a big drop We rally chop we rally back basically filled what would be it looks like a gap and now this sets up potentially the rest of the day because With the index breaking below this support level from the morning at 73 75 73 it sets up a potential retest of the 7560 zone Which would then open up an opportunity to go all the way back to the lows of the day Likewise a takeout of the 75 75 region increases the odds of going to about 75 84 and at least hitting and testing this downtrend But the problem again is that if you're watching how this market is trading it might it might come back down to you know How is the how is the pound trading because if the pound Continues to show signs of weakness against the dollar this would likely be indicative of the market beginning to say that hey You know what all these rate hikes all the rate hikes and the damage that are being caused by high inflation and the BOE's need To raise rates is going to have a significant long-term impact on the British economy And that may actually turn out to be a negative for stocks Which may reverse a trend of higher-rate stronger currency stronger currency brings down inflation stronger currency helps to increase earning power which would be a positive for stocks and that's here it seems to be Potentially reversing today At least this is a trend that you're gonna want to watch and see if this continues develop in the next few days and weeks Anyway, I hope this helps have a great rest of your day