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Correction on a correction? A reality check on an overly optimistic short-squeeze yesterday? Or markets just re-entering low-visibility no-man’s land? Whatever the labeling of the today’s market price action, investors clearly don’t see a good enough reason to build on yesterday’s euphoria triggered by the ceasefire in the war between the US (& Isreal) against Iran. Reportedly, the ceasefire is holding up fairly well except for the Israel’s campaign against Hezbollah which at the same time remains one of many high profile points of discussion between the US and Iran as they prepare for talks in Islamabad this weekend. (Free) passage of shipping through the Strait of Hormuz also faces a huge ‘interpretation gap’ between the parties involved as Iran holds to its point that any passage will be subject to ‘necessary arrangements with the Iranian authorities to securely pass’. This suggests that any normalization of supply from the Persian Gulf probably won’t occur anytime soon. Oil, still one of the better barometers to measure supply obstructions, rebounded from levels just north of $90 p/b yesterday (Brent) to $98 currently. The easing in the TTF Dutch gas reference for now proves to be a bit more resilient (€46 MWh). The Eurostoxx 50, after an outsized 5% gain yesterday, returns 0.7%. US indices open modestly lower (S&P 500 -0.15 %). On yield markets, ECB officials don’t give much of a specific assessment on most recent developments yet. German yields after yesterday’s sharp easing are rebounding between 7 bps (2-y) and +5 bps (30-y). A sideways intraday pattern after a higher open maybe also illustrates some market agnosticism on what to expect both on the geopolitical process as well as on stagflationary risks going forward. US yields in a daily perspective change less than 1 bp across the curve. Data these days, especially if they refer to the pre-war era mostly have little market impact. February US PCE deflators (headline 0.4% M/M and 2.8% Y/Y, core 0.4% M/M and 3% Y/Y) anyway came in as expected, but are holding well above the 2% level going into Iran crisis. Personal income (-0.1%) disappointed. US weekly jobless claims rose a higher than expected 219k , but longer term averages still suggest no major deterioration. As indicated, these data don’t capture much of the post-Iran economic dynamics. In this respect, tomorrow’s US March CPI release is one of the first hard data with potential market relevance.

Despite lingering global uncertainty, the dollar again shows a rather hesitant pattern. DXY eases from 99.05 to 98.90. EUR/USD is holding yesterday’s gain quite easily (EUR/USD 1.169). The yen underperforms with USD/JPY rising from 158.6 to 159.05. Sterling also slightly underperforms the single currency with EUR/GBP returning north of the 0.87 mark.

News & Views

The European Commissioner for Economy Dombrovskis told Members of the European Parliament that nothing prevents EU countries seeking to introduce a windfall tax on energy companies similar to what was done in the wake of the Russian invasion. The raised amount could be used to cushion the blow from the price spike. Dombrovskis said they are looking into a coordinated approach on a European level. He added that other measures are being prepared too, including making sure that electricity is taxed less than fossil fuels. The Commissioner ruled out more radical options such as Italy’s called-for activation of the general escape clause that would temporarily lift the 3% budget deficit rules. “A condition for activating the general escape clause is to have a severe economic downturn in the euro area or European Union. We are currently not in this scenario.”

The Polish central bank kept the policy rate at an unchanged 3.75%. The unusually short policy statement barely touched on domestic developments. Inflation rose to 3% in March, mainly due to a strong surge in fuel prices resulting from the Middle East conflict. The outlook for prices, which next to fiscal policy, fuel price regulations, wage and economic growth is currently strongly influenced by external geopolitical developments, will shape the central bank’s future decisions. The Polish zloty unsurprisingly shrugged at the expected outcome with EUR/PLN hovering around 4.25. Polish swap yields add between 3 and 4.5 bps, joining the broader trend in core euro areas.

Daily Pivots: (S1) 211.85; (P) 212.51; (R1) 213.07; More...

GBP/JPY's rise from 207.20 resumed by breaking 213.29 resistance and intraday bias is back on the upside. Further rise should be seen to retest 214.98 high. On the downside, below 212.31 minor support will turn bias neutral first. But risk will now remain on the upside as long as 209.58 support holds, in case of retreat.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Firm break of 214.98 will target 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. This will remain the favored case as long as 55 W EMA (now at 203.13) holds, even in case of another deep pullback.

Daily Pivots: (S1) 184.63; (P) 185.10; (R1) 185.38; More...

EUR/JPY's rally continues today and intraday bias stays on the upside. Rise from 180.78 should target a retest on 186.86 high. Firm break there will confirm larger up trend resumption. On the downside, below 184.77 minor support will turn intraday bias neutral first. But rise will stay on the upside as long as 182.56 support holds, in case of retreat.

In the bigger picture, a medium term top could be in place at 186.86 and some more consolidations would be seen. Nevertheless, as long as 55 W EMA (now at 176.21) holds, the larger up trend from 114.42 (2020 low) remains intact. Firm break of 186.86 will pave the way to 78.6% projection of 124.37 (2022 low) to 175.41 (2025 high) from 154.77 at 194.88 next.

Daily Pivots: (S1) 157.72; (P) 158.73; (R1) 159.59; More...

Intraday bias in USD/JPY remains neutral for the moment as consolidations from 160.45 is extending. Further rise is expected as long as 157.49 cluster support (38.2% retracement of 152.25 to 160.45 at 157.31) holds. Firm break of 160.45 will resume the rise from 152.25 to retest 161.94 high. However, firm break of 157.31/49 will bring deeper fall back to 61.8% retracement at 155.38 next.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 152.97) holds. Firm break of 161.94 will pave the way to 61.8% projection of 102.58 to 161.94 from 139.87 at 176.75.

Daily Pivots: (S1) 0.7855; (P) 0.7927; (R1) 0.7985; More….

Intraday bias in USD/CHF stays neutral for the moment. With 0.7877 cluster support (38.2% retracement of 0.7603 to 0.8041 at 0.7874) intact, rally from 0.7603 is expected to resume through 0.8041 later. However, decisive break of 0.7874/7 will argue that the rise has completed, and bring deeper fall to 61.8% retracement at 0.7770 and below.

In the bigger picture, rebound from 0.7603 medium term bottom is seen as correcting the fall from 0.9200 only. rejection by 55 W EMA (now at 0.8081) will affirm this case, and setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage. Though, sustained break of 55 W EMA will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 1.3293; (P) 1.3389; (R1) 1.3492; More...

Intraday bias in GBP/USD remains neutral and some more consolidations could be seen below 1.3483 temporary top. Fall from 1.3867 could have completed as a correction at 1.3158 already. Above 1.3483 will target 61.8% retracement of 1.3867 to 1.3158 at 1.3596. Firm break there will bring retest of 1.3867 high. Nevertheless, sustained break of 55 4H EMA (now at 1.3312) will dampen this bullish view and bring retest of 1.3158 instead.

In the bigger picture, current development suggests that price actions from 1.3867 are merely a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is back in favor for a later stage, towards 1.4248 key resistance (2021 high).

Personal income edged lower by 0.1% month-over-month (m/m) in February, coming in below market expectations for a 0.3% gain. Adjusting for taxes and transfers, disposable income also declined by 0.1%, following a strong gain in January that was due to the annual cost-of-living adjustment for social security benefits.

Consumer spending advanced by 0.5% m/m in nominal terms, slightly faster than January's 0.3% pace. However, as in the previous month, nearly all of the gain was attributed to higher prices. In inflation-adjusted terms, spending increased by just 0.1% m/m following no growth in January.

Spending on goods edged up by 0.2% m/m in real terms as purchases of cars and parts rebounded by 4.3% m/m. Outlays on other goods either declined or grew only slightly. Spending on services rose modestly (+0.1% m/m), with higher spending on transportation (+0.7%) and healthcare (+0.3%). However, spending on recreational services declined by 0.4% m/m and spending on accommodation and food edged up only slightly (+0.1% m/m).

The personal saving rate declined to 4.0% from 4.5% the previous month.

Inflation remains persistently above the Fed's 2% target. Core PCE— the Fed's preferred inflation gauge— rose by 0.4% in February, matching gains in the prior two months. In annual terms, core PCE inflation was up 3.0%, down slightly from the 3.1% pace seen in January.

Key Implications

Overall, it was a soft start to the year for U.S. consumers. Real spending remained subdued in February, likely restrained by weather-related factors. While spending on autos and parts rebounded, dining out and recreation remained weak, likely due to the weather. With the recent spike in gasoline prices, attention is now focused on the March report. Some rebound in spending is expected with improved weather, but the report will also be closely watched for signs of consumers pulling back on discretionary purchases amid high prices at the pump.

Headline inflation is expected to jump on higher prices in March, however, it's likely too soon for the second order price effects to show up in core inflation. This is where the uncertainty lies – the longer prices stay elevated – the larger the risks that firms outside of the airlines and transportation industries will begin to pass higher costs to consumers. The U.S. – Iran 10-day ceasefire already seems to be on shaky ground and the uncertainty about the conflict further muddies the water for policymakers. As such, the Fed is likely to remain until there's more clarity on the effects of the war on both the economic and inflation outlook.

Daily Pivots: (S1) 1.1593; (P) 1.1658; (R1) 1.1727; More….

Intraday bias in EUR/USD is turned neutral first with current retreat. Some consolidations could be seen but further rise is expected as long as 55 4H EMA (now at 1.1584) holds. Fall from 1.2081 could have completed as a correction at 1.1408. Above 1.1720 will resume the rise from 1.1408 to 1.8% retracement of 1.2081 to 1.1408 at 1.1824. However, sustained break of 55 4H EMA will suggest that the rebound has completed, and bring retest of 1.1408 low instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1505). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

Global markets have shifted from ceasefire euphoria to cautious consolidation, with Brent oil recovering from initial selloff and stabilizing at around $100, as traders await clarity from high-stakes talks in Islamabad. The initial relief rally in stocks has also stalled quickly, highlighting skepticism that the current truce can deliver a lasting de-escalation.

At the center of the current setup is a clear binary outcome. The Islamabad talks mark the first real transition from a “handshake ceasefire” to a potential “verified accord”, and markets are now waiting for concrete terms rather than political signaling.

If negotiations deliver a credible framework—particularly unconditional reopening of the Strait of Hormuz and a defined timeline for clearing maritime mines—the war premium embedded in oil prices could unwind rapidly. In that scenario, Brent could slide back toward the $80 region as supply normalization becomes credible.

On the other hand, if the U.S. delegation (led by JD Vance) and the Iranian delegation fail to agree on the "Red Line"—which the White House has defined as the total end of uranium enrichment—the ceasefire will be viewed as a 14-day window for Iran to refortify the Strait. In this case, Brent will likely slingshot back to $110+ immediately.

For now, the market is treating the ceasefire as "fragile by design", and underlying developments suggest that caution is warranted.. Continued Israeli strikes in Lebanon and reports of Iran reasserting control over Hormuz transit highlight how quickly tensions can resurface, even within the ceasefire window.

Operational realities in the Strait of Hormuz remain a major constraint. Despite reopening narratives, transit is far from normalized. Additionally, the IRGC intermediaries are demanding lump-sum "transit fees" of up to $2 million per passage, often settled in yuan or tether (USDT), for passage through the Strait effectively bakes a permanent cost increase into every barrel of Middle Eastern crude.

Meanwhile, regional oil facilities remain under threat, with Iran striking ​sites in nearby ⁠countries after the ceasefire, including the East-West Pipeline in Saudi Arabia that has been used to bypass the blockaded Strait of Hormuz. Supply disruptions could still persist regardless of diplomatic progress.

Against this backdrop, traders are reluctant to take directional bets. With talks scheduled for Friday, positioning has turned defensive, as market participants reduce exposure to avoid being caught on the wrong side of a potential weekend gap.

For now, oil remains anchored near $100 as markets await confirmation. Islamabad is the immediate catalyst, but the broader question is whether the ceasefire evolves into a durable framework—or simply marks a brief pause before the next escalation.

In the currency markets, selling pressure has shifted to Yen today, as markets react to the lack of any signal from Kazuo Ueda on the possibility of a rate hike this month. Beyond that, trading remains largely range-bound as participants stay cautious ahead of the geopolitical catalyst.

For the week so far, Dollar remains the worst performer, followed by Yen and Loonie. Kiwi leads gains, with Aussie and Sterling also firm, while Euro and Swiss Franc continue to trade in the middle of the pack.

In Europe, at the time of writing, FTSE is down -0.41%. DAX is down -1.39%. CAC is down -0.71%. UK 10-year yield is up 0.101 at 4.752. Germany 10-year yield is up 0.06 at 3.011. Earlier in Asia, Nikkei fell -0.73%. Hong Kong HSI fell -0.54%. China Shanghai SSE fell -0.72%. Singapore Strait Times fell -0.38%. Japan 10-year JGB yield rose 0.025 to 2.397.

US Core PCE Inflation Eases Slightly to 3% in February

US February data showed a clear split: income declined, but consumer spending remained strong. At the same time, core PCE inflation eased only slightly, highlighting that underlying price pressures are still sticky. Read More.

US Initial Jobless Claims Rise but Continuing Claims Signal Labor Market Resilience

US jobless claims data sent mixed signals. Initial claims rose above expectations, hinting at a gradual cooling in labor demand. But continuing claims dropped to their lowest levels since mid-2024, showing that unemployed workers are still finding jobs quickly. Read More.

BoJ’s Ueda: Negative Real Rates Sustain Investment, Warns of Fiscal Crowding-Out Risks

BoJ’s Ueda highlights negative real rates supporting investment but warns rising fiscal spending could lift yields and risk crowding out private sector activity. Read More.

RBNZ’s Breman: Ready to Act Decisively with Rate Hikes if Inflation Jumps

RBNZ Governor Anna Breman delivered a clear hawkish signal: if inflation starts rising again, the central bank is ready to act decisively with rate hikes. With risks now tilted to the upside, easing is off the table as policymakers focus on preventing a renewed inflation surge. Geopolitical tensions and supply disruptions are adding uncertainty, but the policy bias is clear—RBNZ is prepared to tighten again if price pressures build. Read More.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1593; (P) 1.1658; (R1) 1.1727; More….

Intraday bias in EUR/USD is turned neutral first with current retreat. Some consolidations could be seen but further rise is expected as long as 55 4H EMA (now at 1.1584) holds. Fall from 1.2081 could have completed as a correction at 1.1408. Above 1.1720 will resume the rise from 1.1408 to 1.8% retracement of 1.2081 to 1.1408 at 1.1824. However, sustained break of 55 4H EMA will suggest that the rebound has completed, and bring retest of 1.1408 low instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1505). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

In February, US personal income fell -0.1% mom, or USD 18.2B, undershooting expectations of 0.3% growth. In contrast, personal spending rose 0.5% mom, or USD 103.2B, in line with forecasts, pointing to continued consumption strength despite weaker income dynamics.

On the inflation side, PCE price index rose 0.4% mom, while core PCE also increased 0.4% mom, both matching expectations.

Annually, headline PCE held steady at 2.8% yoy, while core PCE edged down from 3.1% yoy to 3.0% yoy, indicating only a modest easing in underlying price pressures.

Full US personal income and outlays release here.