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Here are the latest developments in global markets:

FOREX: The dollar was trading higher versus a basket of currencies on Tuesday, posting notable gains against the yen in the midst of a political scandal in Japan that raises questions about the government’s ability to deliver moving forward.

STOCKS: US markets were mixed yesterday. The Nasdaq Composite closed 0.4% higher, reaching another record high, but the S&P 500 and the Dow Jones fell by 0.1% and 0.6% respectively. Futures tracking the Nasdaq 100, S&P and Dow are flashing green, pointing to a higher open, but the broader direction of these indices today will likely depend on the upcoming US CPI data. Asian benchmarks were mixed as well. Japan’s Nikkei 225 and Topix closed higher by 0.7% and 0.6% correspondingly, but the Hang Seng in Hong Kong was down by 0.3%. In Europe, futures tracking most of the major indices were in negative territory, but only marginally so.

COMMODITIES: Oil prices fell on Tuesday, with WTI and Brent crude declining by 0.1% and 0.2% respectively, both benchmarks extending losses from yesterday. The losses are being attributed to a report by the Energy Information Administration (EIA) which projected an increase in crude production from major US shale firms, reigniting concerns of an oversupplied market. Today, the weekly private API inventory data will be in focus, ahead of the official EIA figures tomorrow. In precious metals, gold prices declined by 0.25%, last seen around the $1318 per ounce handle. Today, the yellow metal will probably get its directional cue from any movement in the dollar, after the US CPI data.

Major movers: Yen declines as political scandal threatens government’s policies; antipodeans record fresh 2-week highs

The dollar index was 0.1% higher on Monday after shedding 0.2% the day that preceded. February’s CPI reading out of the US due at 1230 GMT, despite not being the Fed’s preferred measure of inflation, is still keenly awaited ahead of the central bank’s meeting next week and is likely to give short-term direction to the US currency.

Dollar/yen was up by 0.4% at 106.85, more than making up for yesterday’s decline. A scandal involving Japanese Finance Minister Taro Aso, a key individual in PM Abe’s government, is casting doubts over the government’s ability to deliver on its economic policy agenda moving forward; the incident is seen as threatening Shinzo Abe from securing a third term as leader of his party when a leadership vote takes place in September. The euro was also up by 0.4% against the Japanese currency, with euro/yen trading at 131.79.

Euro/dollar was little changed at 1.2324. The pair has been unable to make up for the losses incurred after ECB chief Mario Draghi struck a cautious tone on inflation in the euro area last Thursday, saying “victory can’t be declared yet on inflation.”

Sterling lost 0.1% versus the greenback, trading at $1.3887. The pair posted gains yesterday after junior Brexit minister Robin Walker said that the UK is very close to agreeing the details of an implementation period with the EU for its transition out of the bloc. Euro/pound was mostly unchanged after recording losses on Monday.

Aussie/dollar traded higher, though only marginally so, and kiwi/dollar was up by 0.4%. Both pairs posted fresh 2-week highs of 0.7884 and 0.7325 respectively. The aussie was lifted after the NAB’s index of business conditions rose to its highest on record in February, boosting optimism on the economy.

Day ahead: US inflation data to drive the dollar; UK Spring statement in focus with politics also in the spotlight

The main event today will be the release of the US CPI data for February at 1230 GMT. The forecast is for the headline CPI rate to tick up to 2.2% in yearly terms from 2.1% previously, while the core rate is projected to hold steady at 1.8%. These figures will be closely tracked ahead of next week’s Fed policy meeting, as they have the capacity to impact market expectations ahead of the gathering.

The latest set of US wage data – released on Friday – showed that wage growth remains subdued, easing pressure on the Fed to raise rates aggressively. Markets will be looking for a confirmation of this narrative today. If the CPI data disappoint as well, for example if the core rate surprisingly ticks down, then investors could scale back their expectations over how many hikes the Fed will deliver this year. Such an outcome would likely weigh on the dollar, but push US stock indices even higher. On the contrary, an upside surprise in the CPI prints could revive some inflation concerns and heighten speculation for a more aggressive rate path by the Fed, thereby helping the dollar to recover and simultaneously weighing on stocks.

In the UK, Chancellor Philip Hammond will address the Parliament at 1230 GMT in order to present the Spring budget statement. While this budget update is typically used to announce new policy measures, this is unlikely to be the case today, as major announcements have recently been reserved for the main budget, the Autumn statement. Instead, markets may look at the updated economic forecasts for the UK economy, while media reports suggest there may also be some details on the effects of the Brexit divorce bill on UK public finances, both of which could impact sterling.

More broadly, Brexit will likely remain a key driver for the pound over the remainder of the month. Junior Brexit minister Robin Walker said yesterday that the UK and the EU are very close to agreeing a transitional divorce deal, something the EU is expected to approve at its March 22-24 summit. Any comments from UK and EU officials ahead of the summit will probably be critical for sterling’s forthcoming direction.

In energy markets, investors will look to the private API inventory data at 2030 GMT, in order to gauge whether US production has really peaked for the time being, something signaled by the decline in the Baker Hughes oil rig count on Friday.

In politics, all eyes will be turned to the US, where a special election will be held in Pennsylvania for an open seat in the House of Representatives. While a single House seat is usually not very important in US politics, this time is different. Back in 2016, Trump and the Republicans won this district by a landslide, but opinion polls now suggest that the Republican and Democratic candidates are running neck and neck. If the Democratic contender wins, or comes close to winning, that would be a clear sign that the Republicans are at risk of losing districts they won easily in 2016. Such an outcome could heighten speculation that the Republicans may lose control of Congress at the mid-term elections later this year.

Technical Analysis: EURUSD looking neutral in the short-term

EURUSD has been ranging in recent days, moving within the 38.2% and 50% Fibonacci retracement level of the March 1 to March 8 upleg for the most part. The RSI has been largely moving sideways, pointing to a predominantly neutral picture in the short-term.

Stronger-than-expected CPI figures out of the US today, might lead market participants to price in a more aggressive Fed tightening cycle and thus lead to dollar strength. Euro/dollar might find support around the 100-period moving average at 1.2320 in this case – price action is taking place close to this level at the moment – with steeper declines bringing into view the range around the 50% Fibonacci level at 1.2299, including the 1.23 handle that may be of psychological significance.

If the readings disappoint though, euro/dollar could head higher. Resistance could be taking place at the moment in the area around the 50-day MA and the 38.2% Fibonacci mark, ranging from 1.2331 to 1.2334. A move above would turn the attention to the 23.6% Fibonacci level at 1.2376.

It is notable that despite prospects of more Fed rate hikes being theoretically dollar-positive, there are other currency drivers at play that might act to the detriment of the dollar. Market participants seem to be increasingly wary of these drivers.

GBPUSD has been holding in a short-term valid descending trend line since January 25. The pair struggled below the 20 and 40 simple moving averages near 1.3900 and 1.3960 respectively. The bearish correction seems to still be in progress, however, the technical indicators are holding in a neutral territory.

In the daily timeframe, the MACD oscillator jumped above its trigger line and posted a bullish crossover but is still standing below the zero line. Moreover, the RSI is flattening near the 50 level with no clear signal for further upside or downside move in price action.

In case of a penetration below the 23.6% Fibonacci retracement level of 1.3810, this could open the path back to the 1.3710 support level. Breaking this level, the next immediate barrier is near the 1.3660 level. Further losses could push the pair lower towards the medium-term ascending trend line near 1.3620, which has been holding over the last past year.

Conversely, a climb above the downtrend line and the SMAs could drive GBPUSD towards the 1.4070 resistance level. Jumping above this area could drive the pair to the 1.4150 resistance level taken from the peak on February 16.

At 11:30 GMT, the UK Budget Report will be released. This is a mini-budget and outlines the government’s updated budget for the fiscal year, including infrastructure and spending projections, public finance forecasts and potential tax reforms. It is likely that the data will reveal an improvement in the public finances. Analysts will look to the assessment of productivity growth, which was cut in November, the state of the public finances and news on tax reform. GBP may be affected by this report.

At 12:30 GMT, US Consumer Price Index (YoY) (Feb) data will be released, with an expected reading of 2.2% against 2.1% previously. Consumer Price Index Ex Food & Energy (YoY) (Feb) data will be released and is expected to be unchanged at 1.8%. Consumer Price Index Ex Food & Energy (MoM) (Feb) data will be released, with an expected reading of 0.2%, against 0.3% previously. Consumer Price Index (MoM) (Feb) data will be released, with an expected reading of 0.2%, against 0.5% previously. These data points will provide an updated measure of the effect of inflation on consumers. Inflation is one of the main drivers of market sentiment in the US currently. The expectation is for an increase in consumer prices year-on-year but for the monthly reading to show a drop. The higher reading shocked the market in January but can be partly explained as an increase in demand for winter items due to the cold weather. If this is the case, the February number should show a correction. USD pairs and US assets could experience a pickup in volatility due to this data.

At 14:30 GMT, Bank of Canada Governor Poloz will give a speech titled “Today’s Labour Market and the Future of Work” at Queen’s University, in Ontario. CAD pairs could be moved by comments made during the speech or by answers given to audience questions afterwards.

At 23:50 GMT, BOJ Monetary Policy Meeting Minutes will be released, providing key insights into how the decisions made by the Board were influenced by economic conditions. JPY crosses may experience volatility as a result.

Currency pair EUR/USD

The EUR/USDis in a large consolidation zone and the new direction will depend whether price breaks above resistance (red) or below support (green). A bullish breakout would confirm the expected wave 5 pattern

The EUR/USD is building a channel which could indicate a larger WXY (blue) correction within wave 2 (purple) if price breaks below support (blue). A bullish breakout above resistance (orange/red) could start a potential wave 3 (blue).

Currency pair GBP/USD

The GBP/USD is probably ina wave 1-2 (green)within wave 5 (brown) unless price breaks below the bottom of wave 4 (brown). A bullish break above resistance (red) could confirm wave 5 (blue).

The GBP/USD could be building a bearish retracement. A bullish breakout could start a wave 3.

Currency pair USD/JPY

The USD/JPY is in a correction and a bullish breakout above the resistance trend lines (red) is needed before an uptrend could start.

The USD/JPY needs to break above resistance (red) before a larger uptrend could start.

XAUUSD (1318.93): Gold prices once again closed with a doji pattern on Monday but price action was confined to last Friday's range. We expect a downside breakout in price which could see gold prices testing the previous lows around 1307 - 1303 region to establish support at this level. In the event that gold prices post further declines, a retest of the lower support at 1282 - 1274 could be in play

GBPUSD (1.3889): The British pound was seen closing near the resistance level of 1.3902 on Monday and a bearish close today could see price action resuming the decline toward 1.3530. On the 4-hour chart we however see that the price action has consolidated into an ascending triangle pattern. Therefore, a potential breakout above the resistance level at 1.3902 could push the GBPUSD targeting 1.4070 level which would mark the previous high that was formed in the symmetrical triangle pattern.

EURUSD (1.2325): The EURUSD was see trading with Friday's range with price action forming an inside bar. The breakout from the inside bar could potentially indicate the near term bias. We expect to see EURUSD continuing to push lower following the consolidation at the resistance level at 1.2333 - 1.2635. The downside target towards 1.2090 remains in play as long as the resistance level holds the gains in the near term. A convincing close above the resistance level could shift the bias to the upside with the common currency likely to target 1.2443.

Lack of fundamentals on a quiet trading day left the U.S. dollar to trade flat following Friday's decline. However, the USD was seen trading mixed across the board especially with the commodities turning weaker on the day.

Looking ahead, the inflation data coming out today will be a major event to watch with both headline and core inflation rate expected to rise at a slower pace compared to January's solid gains. On an annual basis, headline CPI is expected to rise slightly while core CPI is expected to remain flat at a pace of 1.8%.

Elsewhere, the BoC Governor Poloz is expected to speak later in the afternoon followed by second tier data from Japan.

The British pound has continued to push higher against the U.S dollar, although price-action has so far struggled to make gains above the 1.3900 resistance area. The GBPUSD pair is currently trading around the 1.3890 support level, with buyers now looking for a major technical breakout above the 1.3920 level. Traders look to the release of the UK Budget, where the UK Treasury Chancellor presents the economic forecast for next year, containing details about GDP growth estimates, spending and borrowing forecasts as well as fiscal stimulus.

The GBPUSD pair remains intraday bullish above 1.3890 level, further upside towards 1.3920 and 1.3974 seems possible.

A sustained move below the 1.3890 level may lead to a GBPUSD price-correction back towards the 1.3833 support level.

The euro continues to post fresh intraday trading highs against the greenback, with price-action reaching an overnight high of 1.2345, as the U.S dollar index comes under slight selling pressure. The EURUSD is now trading around the 1.2320 level, after falling back below the 1.2334 level, with the pair still retaining a bullish bias whilst price-action holds above the 1.2305 support level. Traders also remain cautious, ahead of the release of today’s key CPI inflation report from the United States economy.

The EURUSD pair retains a bullish bias whilst trading above the 1.2305 level, with further gains towards the 1.2367 and 1.2400 levels seems possible.

Should the EURUSD pair move below the 1.2305 level, sellers will likely target the 1.2278 and 1.2239 support levels.