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In focus today

In the euro area, focus will be on the preliminary discussions of the proposed fiscal easing package in the German parliament. The Green party has so far refused the coming government's proposal, but we see this as a negotiating tactic to get concessions ahead of the final vote on the bill Tuesday next week. Also in the euro area, industrial production data for January is due. Production has continued a declining trend the past two years, but with the recent improvement in soft indicators it will be interesting to see if hard data also shows a smaller decline in production than previously.

In the US, February PPI and weekly jobless claims are due for release. Following yesterday's CPI, it will be interesting to see if PPI-figures comes in lower than expected as well. Markets expect an increase of 0.3% m/m, down from 0.4% in January.

In Sweden, we will receive the details for the Swedish inflation for February. The flash estimate last week was surprisingly high. The Riksbank's target measurement CPIF came in at 2.9% y/y (cons: 2.7%, prior 2.2%), and core inflation, CPIF ex energy 3.0% y/y (cons: 2.7%, prior 2.2%). Headline CPI 1.3% y/y (cons: 1.1%, prior: 0.9%).

Economic and market news

What happened yesterday

In the US, February inflation figures dropped more than expected to 2.8% (prior: 3.0%, cons: 2.9%), indicating that January's increase was likely a one-off. Core inflation fell to 3.1% (prior: 3.3%, cons: 3.2%). Although US inflation remains elevated, today's figures offer reassurance for both the Fed and consumers. We anticipate a gradual easing of monetary policy in the US, with the next interest rate reduction expected in June.

In the EU, in response to the US metal and steel tariffs that commenced yesterday, the EU commission announced a range of countermeasures against the US. The Commission's response intends to match the economic impact of the US tariffs on a 1:1 basis and can be lifted "at any time" if a resolution with the US is achieved, which remains the EU's goal. Both the US tariffs on steel and metals and the EU's counter tariffs are expected to have limited effect on growth in and inflation as they cover around 5% of total EU exports to the US.

In the euro area, the much-awaited speech by President Lagarde's speech at the ECB Watchers conference did not provide any signals on what to expect at the April meeting. The geopolitical uncertainty and changing fiscal outlook pose fundamental questions for monetary policy, and the ECB is clearly attentive to remaining flexible and agile in its policy response. Lagarde touched upon the risk of inflation volatility turning into persistently elevated inflation as wages adjust, which requires the ECB to not pre-commit to any rate path and remain agile in its communication. Overall, the speech underlined the uncertainty also visible in the vague guidance at last week's meeting. The upcoming data (inflation, PMIs), tariff announcement and fiscal negotiations in Germany will likely be decisive for the outcome. Markets are discounting a 45% probability of a cut in April.

In Canada, the BoC delivered a 25bp cut, as widely expected, setting policy rate at 2.75%. The market reaction was relatively subdued, with significant attention on the uncertainty and trade tensions stemming from US tariffs. The BoC highlighted that monetary policy cannot counteract the effects of a trade war, but it can be utilized to prevent higher prices from leading to persistent inflation. In response to yesterday's tariffs, Canada swiftly retaliated by imposing tariffs on nearly USD 21bn of US goods, labelling the US levies as "completely unjustified, unfair and unreasonable".

Equities: It was perhaps not a bounce, but at least a pause in the US selloff. Gains were driven by last weeks' worst performers. Thus, big difference between indices with S&P500 rising 0.5% but Nasdaq 1.2%. Europe also higher with Stoxx 600 0.8%. Big rotation underneath, with investors rotating out of defensives again (consumer staples -2.5%) and into the MAG7 names. However, risk appetite is worsening this morning again with futures lower.

FI&FX: Yesterday, we finally saw a modest widening of the US-Bund yield spread as European yields declined while US yields rose and the 10Y US-Bund yield spread rose some 5bp from 138bp to 143bp. It has been the same pattern in the 2Y US-Bund yield spread. EUR/USD remained around the 1.09 mark. As widely expected, BoC delivered a 25bp rate cut bringing its policy rate to 2.75%, resulting in a limited market reaction. EUR/NOK traded lower during Wednesday, currently around the 11.57 level, as market's price the probability for March cut close to 50/50. EUR/SEK rose from the 10.93 level to above 11.01 but are now back just below the 11.00 mark.

Daily Pivots: (S1) 191.24; (P) 192.18; (R1) 193.15; More...

GBP/JPY edged higher to 193.09 but quickly retreat. Intraday bias stays neutral for the moment. On the upside, firm break of 193.09 will resume the rebound from 187.04 to 194.73 resistance, and then 198.94. On the downside, firm break of 187.04 will extend the fall from 199.79 towards 180.00 support. Overall, corrective pattern from 180.00 might still be extending.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 160.79; (P) 161.57; (R1) 162.21; More...

Intraday bias in EUR/JPY is turned neutral first with current retreat. Further rally is expected as long as 158.87 support holds. Above 162.34 will resume the rise from 154.77 to 164.89 resistance, as another rising leg in the consolidation pattern from 154.40.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 0.8379; (P) 0.8411; (R1) 0.8429; More...

Intraday bias in EUR/GBP is turned neutral first with current retreat. Another rally is expected as long as 0.8358 support holds. Above 0.8448 will target 0.8472 resistance. Firm break there will resume whole rebound from 0.8221 to medium term falling channel resistance. Nevertheless, break of 0.8358 will suggest that rise from 0.8239 has completed and turn bias back to the downside instead.

In the bigger picture, EUR/GBP is still bounded inside medium term falling channel. While rebound from 0.8221 might extend higher, it could still develop into a corrective pattern. Overall outlook will be neutral at best and down trend from 0.9267 (2022 high) could extend, at least until decisive break of channel resistance (now at 0.8506).

Daily Pivots: (S1) 1.7175; (P) 1.7271; (R1) 1.7321; More...

Intraday bias in EUR/AUD is turned neutral with current retreat. Some consolidations should be seen first. But downside should be contained by 0.6990 support to bring rebound. Meanwhile, break of 1.7417 will resume rise from 1.6335 to 161.8% projection of 1.5963 to 1.6800 from 1.6355 at 1.7709 next.

In the bigger picture, up trend from 1.4281 (2022 low) is resuming. Sustained trading above 1.7180 key resistance will pave the way to 61.8% projection of 1.4281 to 1.7062 from 1.5963 at 1.7682, which is also close to 61.8% retracement of 1.9799 (2020 high) to 1.4281 at 1.7691. For now, this will remain the favored case as long as 1.6355 support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.9582; (P) 0.9617; (R1) 0.9635; More....

Intraday bias in EUR/CHF is turned neutral as it retreated after failing to sustain above 100% projection of 0.9204 to 0.9516 from 0.9331 at 0.9643. Further rally is expected as long as 0.9489 support holds. Firm break of 0.9643 will pave the way to 161.8% projection at 0.9836 next.

In the bigger picture, the strong break of 55 W EMA (now at 0.9482) is a medium term bullish sign. Sustained break trading above long-term falling channel resistance (at around 0.9620) would suggest that the downtrend from 1.2004 (2018 high) has bottomed at 0.9204. Stronger rally should then be see to 0.9928 key resistance at least.

Daily Pivots: (S1) 1.4322; (P) 1.4404; (R1) 1.4454; More...

Intraday bias in USD/CAD remains neutral for the moment. Price actions from 1.4791 high are seen as a corrective pattern, with rebound from 1.4150 as the second leg. On the upside, break of 1.4541 will target 100% projection of 1.4150 to 1.4541 from 1.4238 at 1.4629 and above. But for now, strong resistance is expected from 1.4791 to limit upside to bring the third leg. On the downside, break of 1.4238 will confirm that the third leg has started through 1.4150 support.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

Daily Pivots: (S1) 0.6290; (P) 0.6307; (R1) 0.6337; More...

Intraday bias in AUD/USD remains neutral as range trading continues. On the downside, break of 0.6186 will target 0.6087 support first. Firm break there will resume whole decline from 0.6941. However, sustained trading above 38.2% retracement of 0.6941 to 0.6087 at 0.6413 will raise the chance of near term bullish reversal, and target 61.8% retracement at 0.6615 next.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6487) holds.

Daily Pivots: (S1) 1.0867; (P) 1.0897; (R1) 1.0919; More...

Intraday bias in EUR/USD is turned neutral with current retreat. Some consolidations would be seen first but downside should be contained well above 1.0531 resistance turned support. On the upside sustained trading above 161.8% projection of 1.0176 to 1.0531 from 1.0358 at 1.0932 will target 261.8% projection at 1.1287, which is slightly above 1.1274 key resistance.

In the bigger picture, the strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

Daily Pivots: (S1) 1.2925; (P) 1.2955; (R1) 1.2997; More...

Intraday bias in GBP/USD remains on the upside for the moment. Sustained trading above 61.8% retracement of 1.3433 to 1.2099 at 1.2923 will resume the rise from 1.2099, and pave the way back to 1.3433 high. Nevertheless, break of 1.2860 support should indicate short term topping and bring deeper pullback.

In the bigger picture, fall from 1.3433 (2024 high) should have completed at 1.2099 as a corrective move. Up trend from 1.3051 (2022 low) is still in progress but it's too early to say that it's resuming. Corrective pattern from 1.3433 could extend with one more down leg. But after all, eventual upside breakout is expected at a later stage.