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Economic data takes the spotlight once again on Tuesday, with US inflation figures likely to generate most of the chatter.

Like on Monday, the European release schedule is relatively light on Tuesday. The French government will report on nonfarm payrolls at 06:00 GMT. The report is expected to show employment growth of 0.3% in the fourth quarter.

Two hours later, the Spanish government will report on consumer inflation for the month of February. This includes the monthly consumer price index (CPI) as well as the harmonized index of consumer prices (HICP). The HICP reading is expected to come in at 1.2% annually.

Shifting gears to North America, the US Department of Labor will release its February CPI report at 12:30 GMT. Annual CPI is forecast to strengthen to 2.2%, compared with 2.1% the previous month. So-called core inflation, which strips away volatile goods such as food and energy, is expected to come in at 1.8% year-over-year.

Another month of rising inflation will almost assuredly compel the Federal Reserve to continue raising interest rates sooner rather than later. The Fed is scheduled to hold its next policy meeting on 20-21 March, where officials are widely expected to raise rates for the first time since December. The March policy statement will be delivered alongside quarterly economic projections covering GDP, unemployment and inflation.

North of the border, the Bank of Canada’s Stephen Poloz will deliver a speech at 14:30 GMT. Last week, the BOC kept interest rates on hold amid growing trade risks involving the United States.

Energy traders will also keep tabs on weekly inventory data courtesy of the American Petroleum Institute (API). The API report will be released at 20:30 GMT.

USD/CAD

The US dollar rose against its northern counterpart on Monday, although gains were limited by ongoing geopolitical risks involving the Trump administration. The USD/CAD touched a session high of 1.2844 on Monday and has since backtracked slightly. The pair is now trading at 1.2836, where it is coming up against a firm resistance. On the opposite side of the ledger, immediate support is likely found at 1.2800.

EUR/USD

Europe’s common currency traded sideways on Monday, as investors continued to assess dovish comments from ECB President Mario Draghi. The pair is currently trading around 1.2340. Immediate resistance is located at 1.2380. On the flipside, support is located near 1.2270, the 50-day SMA.

AUD/USD

The Australian dollar edged slightly higher on Tuesday following stronger than expected business data. However, gains remain capped ahead of headline CPI data out of Washington. At the time of writing, the AUD/USD exchange rate was up 0.1% at 0.7882. Immediate support is located around the 0.7820 level. Prices are coming up on an important resistance band near the psychological 0.7900 level.

The US Monthly Budget Statement (Feb) was $-215B v an expected $-216B, against a reading of $49.0B in the prior month. This data represents the balance of the federal government’s income and spending. The February number was the biggest decline in the budget since February of 2014. Seasonally, the February data is lower than other months due to variations that occur at this time of year and events that settle during the month. Receipts are at their lowest in this reading each year, while, for outlays, it is one of the highest, leading to a disparity. USDJPY sold off from 106.538 to 106.310 because of this data release.

New Zealand RBNZ Governor Grant Spencer gave a speech titled “Getting the best out of macro-prudential policy” at the Reserve Bank of New Zealand. He made the following comments: The RBNZ is to review macro-prudential policies with the Treasury. He is keen to see macro-prudential develop as a credible and sustainable policy.

Australian Home Loans (Jan) came in at -1.1% v an expected -0.1%, against a previous -2.3%. This is a volatile data point, with recent extremes between +5 and -6. This result shows a contraction in the number of loans for home purchases. Also released at this time was Investment Lending for Homes (Jan) data, coming in at 1.1% against a previous -2.6%. AUDUSD fell from 0.78743 to a low of 0.78661 after this data.

Japanese Tertiary Industry Index (MoM) (Feb) came in at -0.6% against an expected -0.2%, from 0.0% previously, which was revised up from -0.2%. A lower than expected result is a slight worry for future economic health but inside recent ranges for this data point. USDJPY moved higher from 106.593 to 106.838 after this data was published.

EURUSD is down -0.04% overnight, trading around 1.23290.

USDJPY is up 0.42% in early session trading at around 106.856.

GBPUSD is down -0.13% this morning, trading around 1.38860.

Gold is down -0.28% in early morning trading at around $1,319.28.

WTI is down -0.19% this morning, trading around $61.15.

Headlines/Economic Data

General Trend:

Asian equities trade directionless after mixed US session

Japanese equities pare losses

China shakes up structure of its ministries and government departments: Move seen as attempt to limit bureaucracy and strengthen the leadership of Communist Party

National Australia Bank (NAB) suggests Feb Australia business confidence weighed down by financial market turbulence

South Korea Finance Ministry puts size on planned 50-year bond sale

Volatility in currency market subdued ahead of US Feb CPI data

China Feb Fixed Asset Investment, Industrial Production and Retail Sales due on Wednesday

Japan

Nikkei 225 opened -0.4%; closed +0.7%

TOPIX Iron & Steel Index -0.7%; Electric Appliances

(JP) Japan Fin Min Aso may skip G20 finance minister meeting in Buenos Aires this month – press

(JP) Japan Fin Min Aso: Documents seem to be falsified to fit Sagawa's testimony; will depend on Parliament situation if I will attend G20

(JP) Japan Feb PPI (CGPI) M/M: 0.0% v 0.2%e; Y/Y: 2.5% v 2.5%e

(JP) According to NHK poll PM Abe cabinet approval rating fell to 44% v 46% in Feb

(JP) Japan MoF sells ¥2.2T v ¥2.2T indicated in 0.10% (prior 0.1%) 5-yr bonds; avg yield -0.108% v -0.093% prior; bid to cover 4.18x v 4.67x prior

Looking Ahead: Bank of Japan Jan Policy Meeting Minutes due for release on Wednesday

Korea

Kospi opened flat

(KR) North Korea leader Kim Jung-un would like to sign peace treaty with US and establish diplomatic relations including a US embassy in Pyongyang - financial press

(KR) South Korea Deputy PM Kim: Concerning the US tariffs on steel imports, the Govt will devote all its energy through every available channel in order to get them lifted - Korean press

(KR) South Korea to offer KRW300B in 50-yr bonds on March 15th

China/Hong Kong

Hang Seng opened -0.1%, Shanghai Composite -0.1%

Hang Seng Telecom Index -1.4%, Energy -1.4%, Property/Construction -0.5%; Financials +0.2%

(CN) China proposes to give PBOC some functions currently held by CBRC and CIRC and merge the insurance and banking regulators

(CN) China PBoC Open Market Operation (OMO): Injects CNY60B v CNY90B prior in 7 and 28-day reverse repos; Net injection CNY60B v CNY90B prior

(CN) PBOC sets yuan reference rate at 6.3218 v 6.3333 prior

(HK) Hong Kong new home supply expected to reach 20K units (15-yr high) - HK press

(CN) Shanghai and Shenzhen stock exchanges considering delisting companies for serious law violations – Xinhua

(CN) China Banking Regulatory Commission (CBRC) and four other regulators planning to expand capital tools for commercial banks to replenish their capital in order to boost their support for the real economy – Xinhua

(CN) China National Development and Reform Commission (NDRC) approves 3 coal projects: Approves CNY3.4B coal mine project in Inner Mongolia, capacity of 6Mt/yr

(CN) China State Assets Supervision and Administration Commission (SASAC) official Xiao: China seeks to ensure and increase value of state assets

Looking Ahead: China Feb Fixed Asset Investment, Industrial Production and Retail Sales due for release on Wednesday

Australia/New Zealand

ASX 200 opened +0.5%; closed -0.5%

ASX 200 Resources Index -1.2%, Telecom -1%, Energy -0.7%, Financials -0.4%

(NZ) RBNZ Acting Gov Spencer: Macro-prudential policy ultimately can't control the housing cycle

(NZ) New Zealand sells NZ$2.0B in 3.0% April 2029 bonds, avg yield 3.135%

(AU) Australia sells A$150M in 2027 indexed bonds, avg yield 0.8208%, bid to cover 3.07x

(AU) AUSTRALIA JAN HOME LOANS M/M: -1.1% V -0.2%E; INVESTMENT LENDING: +1.1% V -2.6% PRIOR; Owner occupier home loan value m/m: +1.1% v -1.0% prior

(AU) Australia Feb NAB Business Confidence: 9 v 11 prior; Conditions: 21 v 18 prior

Other Asia

(ID) Indonesia Energy Ministry: Revises effective date for new coal price to March 12th (prior Jan 1st)

(ID) S&P: Reiterates sees no sovereign ratings upgrade for Indonesia in the next 12-24 months, reminder May of 2017 S&P raised the rating to B from BBB-, Outlook stable

North America

US equity markets ended mixed: Dow -0.6%, S&P500 -0.1%, Nasdaq +0.4%, Russell 2000 +0.3%

S&P500 Industrials -1.2%; Real Estate +0.5%

(US) House Intel member Conaway: House panel finds no Russia collusion with Trump

QCOM, [-4.2% after hours], White House announces President Trump will not allow Broadcom takeover of Qualcomm - press

Looking Ahead: US Feb CPI data due for release, along with Weekly API Crude Oil Inventories

Europe

(US) Sec of State Tillerson: Extremely concerned about Russia, UK poisoning an egregious act and will trigger a response, not sure if Russia was involved

Looking Ahead: UK OBR expected to issue Spring Forecasts, while Chancellor Hammond is expected to issue the Spring Statement

Levels as of 01:00ET

Hang Seng -0.0%; Shanghai Composite -0.2%; Kospi +0.1%

Equity Futures: S&P500 +0.1%; Nasdaq100 +0.0%, Dax +0.1%; FTSE100 +0.1%

EUR 1.2345-1.2325; JPY 106.85-106.26; AUD 0.7884-0.7866;NZD 0.7323-0.7292

Apr Gold -0.04% at $1,320/oz; Apr Crude Oil -0.2% at $61.27/brl; May Copper -0.1% at $3.12/lb

Market movers today

Market focus today is on the US CPI core inflation numbers for February, which we expect to come in at 0.2% m/m (1.8% y/y, down from 1.9% y/y in January). We do not think one should read too much into a few releases that came out more strongly than expected, as there is usually some noise in the data.

We recently published a thematic five part series of papers on the theme ‘is inflation finally coming and implications for markets?'. Concerning today's CPI print, we argued in Part 1: Global Inflation: US stimulus and closing output gaps pose upside risk, 26 February, that there are upside risks for US core inflation due to more expansionary fiscal policy but that it will take time for this to materialise.

Luigi Di Maio, leader of Five Star Movement , is due to hold a news conference today at 15:00, which could give some more insight into Five St ar's plans following the inconclusive elect ion result .

Selected market news

This week started quietly. There were only slight developments in the protectionist narrative emanating from Washington. Today all eyes are on inflation.

The European Union is making an at tempt to exempt itself from US steel and aluminium tariffs, while maintaining that it will not cave into bullying.

As the EU deliberates, US President Donald Trump does not . He retorted that his Secretary of Commerce Wilbur Ross will talk to the EU concerning its ‘large tariffs and barriers', which are ‘not fair to our farmers and manufacturers'. The US has come a long way from President Theodore Roosevelt , who prescribed US foreign policy as ‘talk softy and carry a big stick'.

Wilbur Ross and Peter Navarro are two of the architects of current US mercantilist trade policy that is predicated on trade being a zero-sum game. As in checkers (draughts), your loss is my gain. In such a game, current account surpluses serve the national interest. In addition, Navarro and Ross hold that a strong manufacturing sector is a quest ion of national security. We do not expectsanctions to escalate into a full blown trade war. We dive into US tariffs in Research US – Symbolic protectionism with limited impact on growth and inflation but risks remain , 7 March.

Yen is building up broad biased downside bias in hourly chart.

NZD is building up broad based upside bias in hourly chart.

Net effect is: NZD/JPY jumping sharply to as high as 78.26 so far. 38.2% retracement of 81.55 to 75.92 is finally firmly taken out. 78.07. We'd now looking at 61.8% retracement at 79.39.

RBA Key Economic Indicators Snapshot

As at March 12, 2018

• Cash rate: 1.5%
• Economic growth: 2.4%
• Inflation: 1.9%
• Unemployment rate: 5.5%
• Employment growth: 3.3%
• Wage growth 2.1%
• Average weekly earnings: AUD 1192
• Household saving ratio: 2.7%
• Net foreign liabilities: 55% of GDP
• AUD 1 = USD 0.79
• China GDP growth: 6.8%
• G7 GDP growth: 2.3%

Daily Pivots: (S1) 147.51; (P) 147.86; (R1) 148.30; More...

GBP/JPY is staying in the corrective move from 144.97 and intraday bias remains neutral. Further rise might be seen. But upside should be limited by 150.92 (50% retracement of 156.59 to 144.97 at 150.78 to bring fall resumption. Break of 144.97 will extend the decline from 156.59 to 143.51 medium term fibonacci level next.

In the bigger picture, the case for medium term reversal continues to build up. There is bearish divergence condition in daily MACD. 146.96 support was taken out. And GBP/JPY was rejected by 55 month EMA. Break of 38.2% retracement of 122.36 to 156.59 at 143.51 will pave the way to 61.8% retracement at 135.43 and below. This will now be the preferred case as long as 150.92 resistance holds.

Daily Pivots: (S1) 130.91; (P) 131.30; (R1) 131.64; More....

No change in EUR/JPY's outlook. Intraday bias stays neutral first. Corrective rise from 129.34 might extend higher. But we'd be cautious on strong resistance from 38.2% retracement of 137.49 to 129.34 at 132.45 to limit upside. Break of 129.34 will resume the whole decline from 137.49 to 126.61 medium term fibonacci level. Nonetheless, sustained break of 132.45 will target 61.8% retracement at 134.37 first, before resuming the fall from 137.49.

In the bigger picture, current development argues that rise from 109.03 (2016 low) has completed at 137.49, on bearish divergence condition in weekly MACD. Deeper fall should be seen to 38.2% retracement of 109.03 to 137.49 at 126.61 first. On the upside, break of 137.49 is needed to confirm medium term rise resumption. Otherwise, risk will now stay on the downside even in case of strong rebound.

Daily Pivots: (S1) 0.8847; (P) 0.8872; (R1) 0.8894; More...

Intraday bias in EUR/GBP remains on the downside with 0.8896 minor resistance intact. Fall from 0.8967 should target 0.8871 support first. Break there will confirm completion of rebound from 0.8686 and target a retest of this low. On the upside, above 0.8896 minor resistance will turn bias neutral first. Further break of 0.8967 will resume the rebound from 0.8686 to 61.8% retracement of 0.9305 to 0.8686 at 0.9069.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Daily Pivots: (S1) 1.5631; (P) 1.5658; (R1) 1.5693; More....

Intraday bias in EUR/AUD remains on the downside with focus on 1.5626 support. Decisive break there extend the decline from 1.5976 to 61.8% retracement of 1.5153 to 1.5976 at 1.5467 and below. On the upside, above 1.5787 minor resistance will turn bias back to the upside for retesting 1.5976 high instead.

In the bigger picture, change of medium term reversal is increasing with EUR/AUD just missing double projection target. They are 61.8% projection of 1.4421 to 1.5770 from 1.5153 at 1.5987, and 100% projection of 1.3624 to 1.5226 from 1.4421at 1.6023. Also, bearish divergence condition remains in daily MACD. Break of 1.5626 support will add to this bearish case and target 1.5153 key support for confirmation. Nonetheless, before that happens, as long as 1.5153 support holds, medium term rise from 1.3624 could still extend to retest 1.6587 high.