Daily Pivots: (S1) 112.93; (P) 113.48; (R1) 114.28; More...

USD/JPY is still staying inside range of 111.58/114.94 and intraday bias remains neutral. Price actions from 118.65 are viewed as a corrective move. Firm break of 114.94 resistance will indicate that it's completed, on a double bottom pattern (111.58, 111.68). In such case, intraday bias will be turned to the upside for retesting 118.65. Also, the whole rise from 98.97 is likely resuming. On the downside, in case of another fall, we'd still expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

USD/CAD has moved higher throughout the week and this trend continues in the Thursday session. Early in the North American session, the pair is trading at 1.3350. On the release front, Canadian GDP edged lower to 0.3%, matching the estimate. US unemployment claims sparkled, falling to 223 thousand, the fewest since March 1973. On Friday, the US releases ISM Non-Manufacturing PMI, and the markets will be listening closely as Janet Yellen and three other FOMC members deliver speeches.

There were no surprises from the Bank of Canada, which held rates at 0.50%, where they have been pegged since July 2015. However, the rate statement expressed concern, stating that the economy faces "significant uncertainties", including a lack of clarity over Donald Trump's economic agenda. Trump has called for the NAFTA trade agreement to be scrapped, although he has since backtracked and said that he only wanted to "tweak" the provisions that affect Canada-US trade. Still, Trump's protectionist leanings could hurt the Canadian economy, which sends 80% of its exports to its southern border. Even if NAFTA is left alone, the US could slap import duties on Canadian products, which would have negative ramifications for the Canadian economy. Meanwhile, the Canadian dollar is struggling, dropping 1.9% this week. The currency is close to an 8-week low, and USD/CAD could push past the 1.34 level this week.

There was plenty of anticipation in the air ahead of President Trump's speech to Congress. In the end, however, the speech was short on specifics and the markets haven't shown much reaction in the Wednesday session. Trump promised "massive" tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, "financed through both public and private capital". Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we've seen in the past.

When will the Fed press the rate trigger? That should occur in the first half of the year, but the key question is whether the Fed makes a move at the next policy meeting on March 15. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which has raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.

Daily Pivots: (S1) 0.7641; (P) 0.7670; (R1) 0.7704; More...

AUD/USD's fall today and break of 0.7605 support indicates that the rebound from 0.7158 has completed at 0.7740 already. Intraday bias is turned back to the downside for 55 day EMA (now at 0.7570) first. Sustained trading below there will pave the way to lower side of medium term range at 0.7144/7158. On the upside, break of 0.7740 will bring another rise, but we'd still expect strong resistance from 0.7777/7833 resistance zone to bring near term reversal.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8164) and above.

Dollar strengthens further in early US session after strong employment data. Initial jobless claims dropped -19k to 223k in the week ended February 25, below expectation of 245k. More importantly, that is the lowest level since March 1973 and indicates persistent healthiness in the job market. The four-week moving average dropped to 234.25k, down from 240.50k, hitting lowest since April 1973. Continuing claims rose 2k to 2.07m in the week ended February 18. The greenback is boosted by increasing speculations of a rate hike by Fed this month. Technically, the greenback took out near term resistance level against Sterling and Canadian Dollar earlier this week. While it's still limited below corresponding resistance against Euro and Yen, AUD/USD is following and broke a near term support level today.

Euro unmoved by CPI data

Eurozone CPI accelerated to 2.0% yoy in February, above expectation of 1.9% yoy, and met ECB's target. Core CPI, nonetheless, was unchanged at 0.9% yoy. Euro receives little support from the data and remains weak against the greenback. Some analysts point to the fact that core inflation remains weak and stable at best. And, there is no reason for ECB to change its ultra-loose monetary policies. In addition, Eurozone will be facing a number of political risks this year, including elections in France, the Netherlands and Germany, as well as Brexit. Also from Eurozone, PPI rose 0.7% mom, 3.5% yoy in January, unemployment rate was unchanged at 9.6%. German import price rose 0.9% mom in January.

Sterling PMI construction beat expectation

Sterling, on the other hand, strengthens mildly against Euro too. UK construction PMI rose to 52.5 in February, above expectation of 52.0. Markit noted that "February's survey data highlights that the UK construction sector has rebounded from its postreferendum soft patch but remains on a relatively slow growth trajectory." However, "weaker momentum in the house building sector was a key factor weighing on construction growth, alongside a renewed fall in work commercial projects." Also from Europe, Swiss GDP rose 0.1% qoq in Q4, below expectation of 0.4% qoq. Swiss retail sales dropped -1.4% yoy in January.

Australia trade surplus shrank sharply

Australia trade surplus narrowed to AUD 1.3b in January, much smaller than expectation of AUD 3.8b. Exports dropped -3%, AUD 31.8b, led by sharp decline in non-monetary gold and non-rural exports. Imports, however, jumped 4% to 30.5b, with a surge in consumption, intermediate and other merchandise and capital goods. The report is seen as mixed by economists, as the pickup in consumer goods is positive. Also from Australia, building approvals rose 1.8% mom. Japan monetary base rose 21.4% yoy in February.

AUD/USD Mid-Day Outlook

Daily Pivots: (S1) 0.7641; (P) 0.7670; (R1) 0.7704; More...

AUD/USD's fall today and break of 0.7605 support indicates that the rebound from 0.7158 has completed at 0.7740 already. Intraday bias is turned back to the downside for 55 day EMA (now at 0.7570) first. Sustained trading below there will pave the way to lower side of medium term range at 0.7144/7158. On the upside, break of 0.7740 will bring another rise, but we'd still expect strong resistance from 0.7777/7833 resistance zone to bring near term reversal.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8164) and above.

Economic Indicators Update

Brexit-fuelled anxieties have exposed Sterling to sharp losses this week with sellers exploiting the rising uncertainty to attack the GBPUSD to a fresh six-week low at 1.2260 during trading on Thursday. Sentiment is turning increasingly bearish towards the Pound and the terrible combination of soft domestic economic data from the UK coupled with political risk could ensure the currency remains pressured. Although Theresa May has stated that Article 50 will be invoked in roughly two weeks, the government's recent defeat in Lords could add another layer of uncertainty to the ongoing Brexit developments. With the lingering fears over a possible independence referendum from Scotland after Article 50 is invoked adding to the anxiety, it has become quite clear that uncertainty remains a certainty when dealing with Sterling.

From a technical standpoint, the GBPUSD has found itself under renewed selling pressure on the daily charts. The decisive breakdown and daily close below 1.2300 could encourage a lower selloff towards 1.2200.

Dollar bulls are back in town

The growing chorus of hawkish Fed officials raising their thumbs up for an imminent interest rate hike has sent the Greenback to a fresh seven-week high at 102.00 during Thursday's trading session. With US data displaying signs of economic stability and an improving global economy boosting overall sentiment, expectations of a March US interest rate increase have skyrocketed with the CME FedWatch tool displaying a 66% probability. Although markets are now expecting the Fed to raise US rates this month, the Trump uncertainty lurking in the background could still sabotage the central bank's efforts to take action. As of now, the Dollar bulls are back in full force and a breakout above 102.00 on the Dollar Index could encourage a further incline higher towards 102.50.

Currency spotlight - EURUSD

The prospects of higher US rates this year coupled with uncertainty in Europe have made the EURUSD fundamentally bearish. Euro weakness should remain a recurrent theme this quarter as jitters from the political risks in Europe haunt investor attraction towards the currency. From a technical standpoint, the pair is heavily bearish on the daily charts as there have been consistently lower lows and lower highs. A breakdown below 1.0500 could encourage a lower selloff towards the next relevant support at 1.0350.

Commodity spotlight - Gold

Gold may be destined to display explosive levels of volatility this month, as uncertainty coupled with the prospects of higher US rates prompts investors to offload and reload positions in an effort to be on the winning side. Although political risks in Europe, Brexit woes, and Trump developments may support the metal in the medium term, a resurgent Dollar from revived rate hike expectations has exposed the metal to downside risks this week. From a technical standpoint, weakness below $1235 could spark a further selloff back towards the $1220 higher low.

Thursday March 2: Five things the markets are talking about

Fed-funds futures contracts suggest traders now expect the Fed to lift rates this month.

Currently, the market shows a +80% probability for an increase on March 15, more than double the probability accessed on Tuesday.

The market is also suggesting a +53% chance of three-rate increases by the end of the year, up from +42% yesterday.

The shift comes as Fed officials continue to hint more strongly this week that a move is increasingly "likely." Helping the odds was U.S data yesterday, the Fed's preferred gauge of inflation, PCE price index, is nearing its target annual rate of +2% (+1.9%).

Note: Fed's Brainard (Dove, voter): ready to increase interest rates soon because of the improvement in global conditions and continuous growth, while Fed's Kaplan (Moderate, voter): reiterated Fed should begin process of gradual rate hikes.

Fed Chair Yellen gives an address on the U.S economic outlook on Friday in Chicago.

1. Equities trade atop record levels

Regional bourses are not been left out; they too are willing to head towards the lofty record heights experienced by U.S indexes.

Overnight, Tokyo shares jumped to the highest since December 2015 after U.S. indexes set new records on signs growth is firming globally. Japan's Topix climbed +0.8%, despite paring an earlier gain of as much as +1.4%.

Down-under, the Australia's S&P/ASX 200 Index rose +1.3%, the most since November. While the Jakarta Composite Index jumped +1%, it's biggest advance this year. Elsewhere, the Hang Seng erased gains after briefly topping the psychological 24,000 print.

In Europe, equity indices are trading mixed to lower, consolidating some of yesterday's gains after a raft of corporate earnings pre-market, and as political concerns in France weigh. Financials are weighing Eurostoxx while commodity and mining stocks are providing some early support in the FTSE 100.

U.S stocks are set to open in the red (-0.1%).

Indices: Stoxx50 -0.2% at 3,381, FTSE -0.1% at 7,379, DAX -0.1% at 12,055, CAC-40 flat at 4,959, IBEX-35 -0.2% at 9,730, FTSE MIB flat at 19,363, SMI +0.1% at 8,644, S&P 500 Futures -0.1%

2. Oil down on record U.S crude stocks, gold resilient

Oil prices are under pressure Thursday after U.S crude stocks hit an all-time high and official data shows Russian oil production unchanged last month.

Ahead of the open, Brent crude oil is down -50c a barrel at +$55.86 while U.S light crude (WTI) is -45c lower at +$53.38.

Yesterday's EIA data showed crude inventories stateside rose by +1.5m barrels last week to a record +520.2m.

Elsewhere, Russia's oil output was unchanged in February at +11.11m barrels per day. Does this suggest that Moscow's efforts to curb production as part of a global deal may be failing?

Nevertheless, crude prices remained locked within a tight trading range, supported by evidence of other OPEC production cuts by member states – they were +90% compliant in January.

Gold prices (-0.4% to +$1,245.11 an ounce) have slipped overnight as the dollar firmed on hawkish comments from U.S Fed officials that stoked expectations of a rate hike on March 15.

Note: The metal was at the highest level in more than three months last Friday, trading atop of +$1,263.80.

3. Bund yields ignore Eurozone inflation data

Bond investors appear to be ignoring this morning's eurozone inflation data rallying above the ECB's target for the first time in four-years (see below).

The yield on the 10-year German Bund was recently at +0.294%, a tad higher day over day, but down from an intraday high of +0.306%. The market was prepared for the +2% inflation print for February after German annual inflation was reported at +2.2% yesterday. ECB's Draghi and company are expected to look through this price rise driven by energy and food, allowing them to keep the current QE program intact.

Ahead of the U.S open, Yields on 10-year Treasuries have backed up +2bps to +2.47%, after climbing +6bps Wednesday. Down-under, Aussie benchmark yields have slipped -2bps to +2.79%, while those in New Zealand have rallied +3bps to +3.32%.

4. Sterling weak and could get weaker

Prime Minister May's government was dealt a setback from the House of Lords yesterday who voted to amend the Brexit bill to safeguard the right of all E.U nationals currently in the U.K.

The cabinet had hoped to convince the members of the Upper House to vote down the amendment, so as to keep the bill on track to trigger Article 50 by mid-March (dealers believe PM May was hoping March 15).

The bill now goes back to the Lower House, which may yet still have the bill passed on time to trigger Article 50 before the original date of the end of March.

Nevertheless, the amendment requires new legislation to be drawn up, making PM May's schedule "very" tight.

The net result is that GBP/USD (£1.2267) remains soft on a combination of a stronger dollar (rate differentials) and Brexit issues. A technical drop below £1.2250/55 could see the pound fall towards the psychological £1.20 handle and egged on by investors get jittery about the actual triggering of Article 50.

5. Euro Zone headline CPI at four-year high

The eurozone's annual rate of inflation edged above the ECB's target for the first time in four-years last month, jumping to +2.0%, up from +1.8% in January.

The increase is almost entirely down to faster rise in energy and food prices, with the "core" inflation measure stuck at +0.9%.

Data like this should leave the ECB unconvinced that inflation will stay around current levels after the rise in energy prices ends. Investors should not expect the ECB to alter their policy stance any time soon.

Note: The higher headline CPI data has done little to support the EUR (€1.0527) as the core readings remain subdued and locked in the 0.8-0.9% range since last May.

The DAX Index is almost unchanged in the Thursday session. Currently, the DAX is trading at 12,065.75 points. On the release front, Eurozone CPI Flash Estimate jumped to 2.0%, beating the forecast of 1.8%. Later in the day, the US releases unemployment claims, which is expected at 243 thousand, little changed from the previous release. On Friday, Germany releases Retail Sales, with an estimate of 0.2%. The US releases ISM Non-Manufacturing PMI, and the markets will be listening closely as Janet Yellen and three other FOMC members will deliver speeches.

German data was positive on Thursday. Preliminary CPI rebounded with a strong gain of 0.6%, matching the estimate. Unemployment rolls dropped by 14 thousand, better than the estimate of -10 thousand. As well, German Final Manufacturing PMI improved to 56.8, just shy of the estimate of 57.0. Will retail sales follow suit with a strong reading on Friday? This important consumer spending indicator has posted two straight declines, but is expected to show a gain in the January report.

There was plenty of anticipation in the air ahead of President Trump's speech to Congress. In the end, however, the speech was short on specifics and the markets haven't shown much reaction in the Wednesday session. Trump promised "massive" tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, "financed through both public and private capital". Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we've seen in the past.

With Federal Reserve policymakers continuing to sound hawkish about a rate move, the US dollar could make some headway against the euro, which could weigh on the DAX. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.

Euro Zone headline CPI at 4-year high and at ECB target but core inflation remains subdued

Notes/Observations

More hawkish Feb speak raises probability of March hike to over 80%

Euro Zone Feb Advance CPI Estimate of 2.0% is highest level since Feb 2013 while core remain subdued

Euro Zone Unemployment matches 8-year low at 9.6%

Overnight:

Asia:

Australia Jan Trade Balance misses expectations but still registers its 3rd straight surplus (+A$1.3B v +A$3.8Be

Japan Fin Min Aso noted that a wider US/Japan interest rate differential would cause USD/JPY pair to rise further

Japan PM Abe: Japan did not have defense spending cap of 1% of GDP

Europe:

France UDI Party (political ally) suspended support for Republican Party presidential candidate Francois Fillon

PM May lost a vote in House of Lords on amendment to Brexit bill (as speculated); Upper House voted to protect EU citizens' rights in the UK (Vote was 358 to 256); MP's will have chance to remove amendment when Bill returns to Lower House

Greece Official noted thatGreece and creditors concluded 1st round of talks. Had found common ground on some issue while disagreements remain in other areas

Americas:

Fed's Brainard (Dove, voter): ready to increase interest rates soon because of the improvement in global conditions and continuous growth - Fed's Kaplan (moderate, voter): reiterated Fed should begin process of gradual rate hikes

Economic data

(CH) Swiss Q4 GDP (miss) Q/Q: 0.1% v 0.4%e; Y/Y: 0.6% v 1.3%e

(DE) Germany Jan Import Price Index M/M: 0.9% v 0.5%e; Y/Y: 6.0% v 5.5%e

(MY) Malaysia Central Bank (BNM) left its Overnight Policy Rate unchanged at 3.00%; as expected

(ES) Spain Q4 Final GDP Q/Q: 0.7% v 0.7%e; Y/Y: 3.0% v 3.0%e

(ES) Spain Feb Net Unemployment M/M: -9.4K v +4.6Ke

(IT) Italy Jan Preliminary Unemployment Rate (beat): 11.9% v 12.0%e

(UK) Feb Construction PMI: 52.5 v 52.0e

(EU) Euro Zone Feb Advance CPI Estimate (in-line) Y/Y: 2.0% v 2.0%e (highest level since Feb 2013); CPI Core Y/Y: 0.9% v 0.9%e

(EU) Euro Zone Jan Unemployment Rate (in-line): 9.6% v 9.6%e (matches its lowest level since 2009)

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €3.43B vs. €3.0-4.0B indicated range in 2022 and 2027 Bonds

Sold €1.603B in 0.4% Apr 2022 SPGB; Avg yield: 0.487% v 0.532% prior; Bid-to-cover: 1.88x v 1.53x prior

Sold €1.834B in 1.5% Apr 2027 bond; Avg yield: 1.684% v 1.733% prior; Bid-to-cover: 1.42x v 2.95x prior

(ES) Spain Debt Agency (Tesoro) sold €948M vs. €0.5-1.0B indicated range in I/L 0.3% Nov 2021 bond (SPGBei;Bonoei); Real Yield: -0.674% v -0.620% prior; Bid-to-cover: 1.83x v 1.94x prior Oct 6th 2016)

(FR) France Debt Agency (AFT) sold total €6.995B vs. €6.0-7.0B indicated range in 2026, 2036 and 2066 Oats

Sold €3.622B in 0.25% Nov 2026 Oat; Avg Yield: 0.91% v 1.07% prior; Bid-to-cover: 2.75x v 2.09x prior

Sold €2.345B in 1.25% May 2036 Oat; Avg Yield 1.61% v 1.49% prior; Bid-to-cover: 1.81x v 2.00x prior

Sold €1.028B in 1.75%May 2066 Oat: Avg Yield: 2.14% v 2.02% prior, Bid-to-cover: 1.99x v 1.86x prior

(SE) Sweden sold total SEK750M in I/L 2022 and 2027 Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.2% at 3,381, FTSE -0.1% at 7,379, DAX -0.1% at 12,055, CAC-40 flat at 4,959, IBEX-35 -0.2% at 9,730, FTSE MIB flat at 19,363, SMI +0.1% at 8,644, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are trading mixed to lower consolidating yesterday's gains after a raft of corporate earnings pre-market, and as political concerns in France weigh; markets jittery after French authorities decided to formally investigate conservative candidate Francois Fillon for misusing public funds; Eurostoxx weighed by shares of Anheuser Busch InBev and Deutsche Telekom after releasing their respective earnings results; shares of Engie the notable gainer in the index, also after releasing their results; Commodity and mining stocks providing some support in the FTSE 100 as copper prices consolidate near yesterday's rally highs.

Upcoming scheduled US earnings (pre-market) include Abercrombie & Fitch, Autohome, Barnes and Noble, Burlington Stores, GCP Applied Technologies, Triple-S Management, JD.com, Joy Global, Kroger, Stage Stores, and Olympic Steel.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Adecco ADEN.CH -3.9% (earnings, share buyback), Anheuser Busch InBev ABI.BE -2.6% (earnings), Capita CPI.UK -8.9% (earnings, CEO to step down), Continental CON.DE -0.9% (earnings), JC Decaux DEC.FR +4.0% (earnings), Jimmy Choo CHOO.UK +0.3% (final earnings), Merlin Entertainments MERL.UK -3.5% (earnings)]

Energy: [Hunting HTG.UK +1.3% (earnings)]

Financials: [Aldermore ALD.UK +4.6% (earnings), Hastings HSTG.UK +1.6% (earnings)]

Healthcare: [ALK-Abello ALKB.DK +3.1% (FDA approves Odactra for house dust mite allergies), Roche ROG.CH +5.2% (Phase III APHINITY study of Perjeta regimen meets primary endpoint), Spire SPI.UK +4.7% (earnings)]

Industrials: [Cobham COB.UK +3.5% (earnings, rights issue), Evonik EVK.DE +0.3% (earnings), Kion KGX.DE -0.1% (earnings), Subsea 7 SUBC.NO +11.7% (earnings)]

Materials: [LafargeHolcim LHN.CH +3.5% (earnings, share buyback)]

Telecom: [Deutsche Telekom DTE.DE -2.2% (earnings, €2.2B writedown)]

Utilities: [Engie ENGI.FR +6.3% (earnings, cuts dividend in 2017 and 2018)]

Speakers

Spain Fin Min de Guindos commented after Q4 GDP data that exports and consumers led growth in Q4. Believed 2017 GDP growth of 2.5% was guaranteed.

France Presidential candidate Macron: Would sell down €10B in govt stakes of French companies. Pledged massive effort for apprenticeships and cut labor costs

China Securities Regulatory Commission (CSRC) chairman Guo Shuqing: To strengthen supervision of the lending sector

Malaysia Central Bank Policy Statement noted that the current level of Overnight Policy rate (OPR) stance remained accommodative and supportive of economic activity. Headline inflation to be relatively high in H1 and growth momentum expected to be sustained during 2017. Risks to global growth remained and included threats of protectionism, geopolitical developments and volatility of financial markets

Currencies

USD maintained its firm footing and was supported by hawkish commentary by Brainard (dove and voter) who made it clear to the audience that the Fed was in a rate hike mood. Market likely to hear similar commentary when Vice Chair Fischer and Chair Yellen speak on Friday. Expectations for a Fed hike has risen over the course of the week from 30% to over 80% on Thursday

USD/JPY hit a 2-week high above 114.30 in the session aided by the widening of US-Japan interest rate differentials

EUR/USD drifted lower to test 1.0525 in the session. The higher headline CPI data for the Euro Zone did little to support the Euro as the core readings remain subdued and locked in the 0.8-0.9% raeneg since last May. Data still keeps sentiment that ECB will see the recent pick-up in headline inflation as transitory.

Fixed Income:

Bund futures trade at 164.95 down 6 ticks trading in the middle of today's range, with price continuing to come off the February highs. Key resistance remains the 166.22 level. Downside momentum targets 164.10 initially followed by 162.50. A resumption higher targets 166.15 followed by 167.79.

Gilt futures trade at 128.08 up 28 ticks with volatility likely to increase due to futures rolling to the June contract this week. Resistance remains the 128.34 Monday high then 128.70. Support lies at 127.50 followed by 126.80 then 125.90.

Looking Ahead

05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)

05:30 (UK) DMO to sell £2.5B in 0.5% 2022 Gilts

05:30 (PO) Poland to sell Bonds

06:00 (IE) Ireland Feb Live Registry Monthly Change: No est v -3.5K prior

06:00 (PT) Portugal Jan Industrial Production M/M: No est v 1.3% prior; Y/Y: No est v 5.1% prior

06:00 (ZA) South Africa Jan Electricity Consumption Y/Y: No est v -1.0% prior; Electricity Production Y/Y: No est v 0.8% prior

06:30 (BR) Brazil Central Bank (BCB) Feb COPOM Minutes

06:45 (US) Daily Libor Fixing

07:00 (UR) Ukraine Central Bank Interest Rate Decision: Expected to leave Key Rate unchanged at 14.00%

07:00 (BR) Brazil Feb PMI Manufacturing: No est v 44.0 prior

07:30 (US) Feb Challenger Job Cuts Y/Y: No est v 45.9K prior; Y/Y: No est v -38.8% prior

08:00 (RU) Russia Gold and Forex Reserve w/e Feb 24th: No est v $393.6B prior

08:00 (SG) Singapore Feb Purchasing Managers Index: 51.0e v 51.0 prior; Electronics Sector: No est v 51.8 prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Initial Jobless Claims: 245Ke v 244 K prior; Continuing Claims: 2.06Me v 2.060M prior

08:30 (CA) Canada Dec GDP M/M: 0.3%e v 0.4% prior; Y/Y: 1.7%e v 1.6% prior, Quarterly GDP Annualized: 2.0%e v 3.5% prior

08:30 (US) Weekly USDA Net Export Sales

10:00 (DK) Denmark Feb Foreign Reserves (DKK): 459.0Be v 457.8B prior

10:00 (CO) Colombia Jan Exports: $2.7Be v $3.4B prior

10:00 (MX) Mexico Central Bank Economist Survey

10:00 (BR) Brazil to sell Fixed Rate 2-23 and 2027 Bonds

10:00 (BR) Brazil to sell 2017, 2019 and 2020 Bills

10:30 (US) Weekly EIA Natural Gas Inventories

11:00 (IS) Iceland Q4 Current Account (ISK): No est v 100B prior

12:00 (CA) Canada to sell 10-Year Bonds

13:00 (BR) Brazil Feb Trade Balance: $3.4Be v $2.7B prior; Exports: $14.7Be v $14.9B prior; Imports: $11.1Be v $12.2B prior

15:30 (MX) Mexico Jan YTD Budget Balance (MXN): No est v -503.7B prior

EUR/USD is almost unchanged in the Thursday session. Currently, the pair is trading at 1.0520. On the release front, Eurozone CPI Flash Estimate jumped to 2.0%, beating the forecast of 1.8%. Later in the day, the US releases unemployment claims, which is expected at 243 thousand, little changed from the previous release. On Wednesday, German Preliminary CPI posted a gain of 0.6%, matching the forecast.

Currency markets showed muted reaction to President Trump’s speech to Congress on Tuesday. Trump promised “massive” tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, “financed through both public and private capital”. Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past.

With Federal Reserve policymakers continuing to sound hawkish about a rate move, the US dollar could make some headway against the euro and other major currencies. On Tuesday, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed, which raised the odds of a March hike at 66%, according to Reuters. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets will be listening closely to speeches from other FOMC members this week, culminating in speeches from Janet Yellen and Fed Governor Stanley Fischer on Friday.

• Brainard comments the icing on the cake;
• Mester the latest Fed official to speak ahead of tomorrow's busy schedule;
• Strengthening dollar weighing on resilient Gold;
• Commodity currencies could remain under pressure today.

A day after their biggest daily gains of the year so far, US equity indices are heading for an unchanged open on Thursday as investors await more commentary from the Fed ahead of its blackout period.

The language from the Fed has become far more hawkish over the last couple of weeks and yesterday's comments from Lael Brainard – arguably the most dovish policy maker – was the icing on the cake. Not only is March now on the table, in many people's eyes it's the base case scenario which is a massive change from even a week ago. Regardless of whether the Fed opts to raise rates in two weeks or not, it's quite clear now who is guiding who.

In what has already been quite a busy week on the Fed calendar, we're still yet to hear from Loretta Mester today – a non-voter this year – and Chair Janet Yellen, vice Chair Stanley Fischer, Jerome Powell and Charles Evans tomorrow –all of which are voters. Needless to say, expectations are likely to fluctuate a lot between now and close of play Friday, at which point the Fed's blackout period will begin. With rate hike expectations now above 70% for March, the job of the remaining officials should be straightforward if keeping March on the table is in fact their aim.

The sudden change in rate hike expectations has been accompanied by a strengthening of the dollar, which is of course to be expected, which is once again today putting pressure on Gold. The yellow metal has until now been very resilient to dollar strength, possibly a reflection of the political risk environment with Trump, Brexit and the French elections making investors a tad uneasy. Gold is trading around half a percentage point lower today and should we see a break below yesterday's low – around $1,236.45 – it could trigger a sharper sell-off.

In the absence of much economic data today – jobless claims being the only notable release – attention is likely to remain on what the Fed is doing and what we expect it to do in two weeks. It will be interesting if the dollar builds on its gains ahead of all the Fed speeches tomorrow, which could continue to weigh on commodities and the related currencies such as the AUD, CAD and NZD.