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In focus today

In the euro area, focus turns to the German flash inflation print and the seller price expectations in the EU Commissions' business surveys for March. German inflation is projected to rise to 2.7% y/y from 1.9% y/y, driven entirely by energy prices. As the data does not fully reflect the war's impact, the EU Commission's survey on selling price expectations, which the ECB is closely monitoring as noted by President Lagarde, will also be critical.

Also in the euro area, ECB's Stournaras is giving a speech today and markets will be looking for comments on monetary policy and inflation.

In Sweden, retail sales figures for February are likely to hold limited significance, given recent developments in the Middle East. That said, recent months have shown a disconnect between retail sales and consumer confidence. Notably, January saw a 4.1% y/y rise in retail sales, despite weak consumer confidence.

In the US, Fed chair Powell and Fed's Williams are scheduled to speak.

In Japan, Tokyo March CPI data will be released overnight, providing an early glimpse into the energy shock's impact on Japanese consumer prices. February data on retail sales, unemployment, and industrial production will also be released, offering largely outdated insights.

Overnight, China will release NBS PMIs for manufacturing and services. NBS manufacturing PMI fell to 49.0 in February, but March signals from the Emerging Industries PMI and Yicai's high-frequency indicator suggest a rebound, though the Iran war introduces some uncertainty.

During the week, we get key US labour market data with the JOLTS job openings, Challenger job cuts ahead of the main release, non-farm payrolls on Friday. In the euro zone, Flash CPI for March, released Tuesday, will be in focus.

Economic and market news

What happened over the weekend

Middle East tensions have escalated sharply as Trump, in a Financial Times interview, suggested seizing Iran's Kharg Island, which handles 90% of its oil exports, a potential shift from airstrikes to direct resource control. US ground deployment considerations significantly elevate tail risks, given Iran's advanced missile and drone capabilities alongside the vulnerability of fixed assets. The Pentagon is also intensifying its presence, deploying approx. 10,000 troops trained for territorial operations. Amid these developments, Trump disclosed direct and indirect talks with Iran, describing its new leaders as "very reasonable," even as Tehran warned against humiliation. Pakistan is preparing to mediate talks to end the month-long Iran war. Brent Crude rose to around 115 USD/bbl during early Asian trading.

What happened Friday

In Norway, the seasonally adjusted unemployment rate stayed at 2.1% in March, slightly above Norges Bank's forecast (2.0%) but unlikely to impact markets due to the minimal deviation. A marginal rise in unemployed persons suggests a slightly looser labour market. Retail sales fell 1.1% m/m in February, roughly as anticipated. Higher electricity bills may have dampened spending. Despite monthly volatility, retail activity has shown an upward trend since early 2025, supported by strong wage growth and easing mortgage rates.

In the euro area, Spanish HICP inflation rose to 3.3% y/y in March (below 3.8% consensus), with core inflation unchanged at 2.7%. Note that it is still early days in the impact of the war on the economy. Spain's faster energy price passthrough and a high base effect contributed to the print. Hence euro area inflation expected to rise less than Spain on Tuesday, with consensus currently expecting a rise to 2.7% y/y from 1.9% y/y in February. A dovish signal for the ECB.

ECB's Schnabel, typically a hawk, adopted a more dovish tone late Friday, emphasising caution. She stated the ECB "must be vigilant, but no need to rush" and should avoid overreacting to energy price shocks, highlighting the importance of assessing data for second-round effects and demand conditions. While this suggests she is not pushing for immediate hikes in April, her pre-war hawkish stance and optimism on the economic outlook indicate she may still align with the consensus, which appears tilted towards a hike.

In the US, the Final UMich 1-year inflation expectations were revised to 3.8% in March (prelim: 3.4%), reflecting rising gas prices. Long-term 5-year inflation expectations remained steady at 3.2%, suggesting anchored longer-term views.

Fed's Barkin and Paulson, Barkin emphasised prudence in holding rates steady amid uncertainty, noting risks of stalled inflation progress even before the oil shock. He highlighted a fragile labour market with low unemployment but multiple applicants per job and limited wage pressure, consistent with current market pricing. Philly Fed's Paulson echoed a cautious and balanced tone, highlighting that the Iran war poses risks to both growth and inflation.

Equities: Equities had a rough end to last week, extending the drop from Thursday by another 1.4%. S&P500 declined 1.7%, with Nasdaq down 2.2%, Russell 2000 -1.8% and Stoxx600 down 1%. Concerns over the growth implications for the continued rise in oil prices dominated discussions, in an almost textbook risk off session due to demand destruction concerns. Defensives, led by Energy companies being up 1.9%, outperformed cyclicals. Overnight, futures as well as Asian equities are down, amid the Houthi's strike during the weekend.

FI and FX: The combination of energy prices taking another leg higher on renewed escalation risks in Iran and the fact that it increasingly looks likely that central banks will hike policy rates into a slowing economy sets the tone in FI and FX markets. After a nervous end to the last week cyclically sensitive assets are also opening in red territory this morning albeit FX spot moves have been fairly modest compared to recent Mondays. US yields are slightly lower this morning while precious metals are little changed from Friday's close.

Daily Pivots: (S1) 0.6854; (P) 0.6884; (R1) 0.6904; More...

AUD/USD recovers mildly after initial dip, but there is no sign of bottoming yet. Intraday bias stays on the downside at this point. Current fall from 0.7187 should target retracement of 0.5913 to 0.7187 at 0.6700. On the upside, above 0.6911 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.7187 resistance holds, in case of recovery.

In the bigger picture, as long as 0.6706 cluster support holds, rise from 0.5913 (2024 low) should still be in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). However, firm break of 0.6706 will dampen this bullish case, and bring deeper fall back to 0.6420 support, and possibly below.

Dollar has entered tactical consolidation as markets weigh a high-stakes diplomatic effort in Pakistan against the escalating risks of a “Maritime Double Chokepoint.” While regional powers attempt to broker an Iran ceasefire, the absence of confirmed U.S. and Iranian attendance suggests the talks are more of a hope-driven distraction rather than a strategic breakthrough. Meanwhile, with Israeli Prime Minister Netanyahu signaling a permanent “Gaza Model” for Southern Lebanon and Houthi rebels threatening a total maritime bottleneck, the structural floor for $110 Brent remains locked. This suggests the current Dollar softness could be a "Spring-Load" phase before geopolitical escalations eventually overwhelm the market’s skeptical hope.

Pakistan has emerged as a key diplomatic hub, hosting regional talks involving Saudi Arabia, Turkey, and Egypt aimed at brokering a ceasefire. However, optimism remains tempered. It is not yet clear whether the US or Iran will participate, leaving the initiative closer to a regional coordination effort than a confirmed breakthrough. As a result, markets are treating the development as a tentative off-ramp rather than a decisive de-escalation.

At the same time, escalation risks continue to build. The order to expand Israeli operations in Southern Lebanon using the "Gaza Model" terminology is a transformative signal. It tells traders that regional instability is no longer a temporary spike but a structural feature. A long-term military buffer zone in Lebanon ensures that energy and logistics risks are baked in for 2026.

The most underrated risk is probably the Houthi entry into the conflict. With both the Strait of Hormuz and the Bab el-Mandeb under threat, global maritime flows face a significant bottleneck. This "Double Chokepoint" is helping to keep energy prices elevated, with Brent holding above $110 and WTI above $100.

Against this backdrop, attention is also turning to a critical “Judgment Week” of economic data. Releases including ISM Manufacturing, Eurozone CPI, and US nonfarm payrolls will be closely watched for confirmation of whether the energy shock is feeding into inflation and labor market. The data will play a key role in shaping expectations for central bank policy paths.

In the currency markets, Yen is the strongest performer for the day so far, rebounding after Japan issued a “final warning” on intervention. Euro and Sterling are also slightly firmer. Australian and New Zealand Dollars are underperforming, pointing to a cautious risk tone. while Dollar is also soft. Swiss Franc and Loonie are trading in the middle of the pack.

Japan Issues Intervention “Final Warning” as USD/JPY Breaks 160, but Dollar Strength Prevents Reversal

Japan escalated intervention rhetoric after USD/JPY broke above 160, issuing what markets see as a “final warning.” However, strong Dollar momentum continues to limit the impact, turning intervention into a ceiling rather than a reversal trigger. Yen strength is instead showing more clearly in crosses such as AUD/JPY, where downside has extended. Read More.

BoJ Warns of “Behind the Curve” Risk as Yen Depreciation Amplifies Inflation Pressure

BoJ flagged the risk of falling “behind the curve” as yen depreciation amplifies inflation pressure and raises concerns over second-round effects. Policymakers signaled readiness to accelerate rate hikes if needed, especially if wage growth and cost pass-through persist. The shift highlights growing sensitivity to currency-driven inflation and strengthens the tightening bias. Read More.

Judgment Week: Fed's Rate Deadlock and the Non-Farm Payroll Verdict

Markets head into a decisive “Judgment Week” as NFP, ISM, and Eurozone CPI test whether the energy shock is feeding into broader inflation. With oil above $110, the Fed faces a dual-mandate deadlock between rising price pressures and weakening labor signals. Friday’s payrolls will be key in determining the 2026 interest rate path. Read more.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6854; (P) 0.6884; (R1) 0.6904; More...

AUD/USD recovers mildly after initial dip, but there is no sign of bottoming yet. Intraday bias stays on the downside at this point. Current fall from 0.7187 should target retracement of 0.5913 to 0.7187 at 0.6700. On the upside, above 0.6911 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.7187 resistance holds, in case of recovery.

In the bigger picture, as long as 0.6706 cluster support holds, rise from 0.5913 (2024 low) should still be in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). However, firm break of 0.6706 will dampen this bullish case, and bring deeper fall back to 0.6420 support, and possibly below.

Japan has officially triggered its “Final Warning” as USD/JPY breached the 160 Red Line, but the resulting policy pressure is unlikely to break the back of Dollar. Instead, the coordinated “Double-Team” effort from the Ministry of Finance and the Bank of Japan is creating a tactical ceiling in USD/JPY, that will squeeze Yen-short positioning into the crosses like AUD/JPY.

Vice Minister Atsushi Mimura has made it clear today: authorities are prepared for "bold steps" to counter speculative activity, and "decisive action may soon be necessary." The language marks a clear step-up in intervention rhetoric, reflecting rising concern over the pace of Yen depreciation and its implications for the Japanese economy.

BoJ Governor Kazuo Ueda added to the coordinated messaging, emphasizing that rising import costs from a weak currency could justify raising interest rates in the coming months. "We don't guide monetary policy directly ⁠to control foreign exchange rate moves," Ueda told Parliament. "But currency market ​moves are obviously among factors that hugely affect economic and price developments."

However, as broad-based Dollar strength continues to dominate due to global stagflation fear. In this environment, verbal intervention alone is unlikely to generate sustained reversals. Unless authorities move to direct market intervention or there is a broader shift in Dollar dynamics, USD/JPY is likely to remain supported near current levels, just capped below 160 for now. Yen strength, when it does emerge, is more likely to be expressed through crosses rather than against Dollar.

Technically, further rise is still in favor in USD/JPY as long as 55 4H EMA (now at 159.15) holds. Current rise from 152.25 is still in favor to continue to retest 161.94 (2024) high. However, sustained break of 152.25 will argue that a short term top is formed and further pullback would be seen back to 157.49 support and possibly below.

AUD/JPY's fall from 113.94 top continue today. As long as 110.39 minor resistance holds, deeper decline is still expected to 107.67 structural support in the near term.

Key Highlights

• EUR/USD started a fresh decline and traded below 1.1550.
• It traded below a bullish trend line with support at 1.1520 on the 4-hour chart.
• GBP/USD extended losses and traded below 1.3320.
• Gold prices are showing signs of weakness below $4,550.

EUR/USD Technical Analysis

The Euro failed to settle above 1.1620 against the US Dollar. EUR/USD started a fresh decline and traded below the 1.1565 support.

Looking at the 4-hour chart, the pair settled below 1.1550, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). Besides, it traded below a bullish trend line with support at 1.1520.

The pair is now consolidating near the 61.8% Fib retracement level of the upward move from the 1.1410 swing low to the 1.1639 high.

On the upside, the pair is now facing sellers near 1.1550 and the 100 simple moving average (red, 4-hour). The first major resistance sits at 1.1580. A close above 160.00 could open the doors for gains above 1.1600. In the stated case, the bulls could aim for a move to 1.1640.

If there is no upside break above 1.1600, the pair might start a fresh decline. Immediate support is seen near 1.1500. The first key support sits at 1.1440. A close below 1.1440 might call for heavy losses. In the stated case, it could even revisit 1.1400 in the coming days.

Looking at Gold, the price is signaling a fresh decline, and there are chances of a drop toward the $4,250 level.

Upcoming Key Economic Events:

• German Consumer Price Index for March 2026 (YoY) (Prelim) – Forecast +2.1%, versus +1.9% previous.
• German Consumer Price Index for March 2026 (MoM) (Prelim) – Forecast +0.9%, versus +0.2% previous.

Markets were mainly focused on developments in Iran last week, creating high volatility across oil and equity markets. Early in the week, efforts by Donald Trump to reduce tensions helped calm sentiment. Oil prices moved lower, and stock markets pushed higher as traders hoped for progress.

By the end of the week, however, there was little progress in negotiations, and Iran did not appear ready to end the conflict. This shifted sentiment back to risk-off. Oil prices moved toward the $100 level again, while U.S. equity markets reversed lower, falling for a fifth straight week and closing near their weekly lows.

On the economic side, there were not many major releases, but the data added to concerns. U.S. S&P Global Services PMI came in weaker than expected, and consumer sentiment also declined. Consumers are now expecting higher inflation and are more worried about the future, which is keeping overall market sentiment cautious.

Markets This Week

U.S. Stocks

The downtrend in U.S. stocks is still strong as markets worry about rising inflation from the conflict in Iran. The chart looks bearish, with the 10-day moving average acting as resistance, and the Dow closing near its yearly lows. Even though stocks have fallen recently, they are still relatively high compared to the past few years, so investors may still panic and take profits. Unless the war clearly ends, focusing on selling opportunities remains the best approach. Resistance levels are at 46,500, 47,500, and 48,000. Support is seen at 45,000, 44,500, 44,000, and 43,500.

Japanese Stocks

Optimism about a possible end to the Iran conflict and a weaker yen helped push the Nikkei higher earlier in the week. However, the sharp drop in U.S. equities on Friday brought sellers back into the market, and the overall downtrend remains in place. Inflation is still a concern for Japan, especially with high oil prices, and there is also the risk of Bank of Japan intervention to support the yen. This makes it unlikely that the Nikkei will rise significantly in the short term. Selling near the 10-day moving average remains the preferred approach for the coming week. Resistance is seen at 53,000, 54,750, 56,000, 57,000, and 58,000, while support is at 51,000円, 50,000円, and 49,000円.

USD/JPY

USD/JPY continued to move higher, driven by rising U.S. interest rate expectations, and pushed above the key 160 level at the end of the week. Oil prices are still having a strong impact on short-term moves. This week, traders are likely to test the upside to see if the Bank of Japan will intervene. If there is no intervention, the pair could move higher quickly, while any intervention could cause a sharp drop. The uptrend remains strong, so selling in anticipation of intervention is risky in the short term. However, a move back below 160 could create a short-term selling opportunity. Resistance is at 162, and 165, while support is seen at 159.00, 158.50, 158.00, and 156.50.

Gold

Rising U.S. interest rate expectations continued to pressure gold last week, with a sharp sell-off at the start of the week breaking below yearly lows. There was a small recovery, but gains were limited as the 10-day moving average continued to act as strong resistance. Gold has fallen significantly in recent weeks, and the break below the lows followed by a recovery suggests the worst of the selling may be over in the short term. A move above the 10-day moving average, especially if tensions in Iran ease, could offer a buying opportunity in the week ahead. Resistance is at $4,700, $4,850, $5,000, and $5,100, while support is at $4,400, $4,300, $4,200, $4,100, and $4,000.

Crude Oil

WTI fell sharply at the start of the week after failing to break above $100 and on hopes of a quick end to the Iran conflict. However, as it became clear that Iran is likely to continue hostilities, buyers returned, pushing prices higher and closing the week above $100. This suggests strong underlying demand. Expect a volatile start to the week, with the potential for another spike above $100 and the risk of a further strong move higher if tensions continue. Resistance is at $102.50, $110, $120, $125, and $130, while support is at $90, $80, $75, $70, and $67.5.

Bitcoin

Bitcoin remains quiet, trading between $65,000 and $75,000, as traders focus on other markets with better opportunities. The sharp drop in U.S. equities on Friday triggered risk-off selling, pushing Bitcoin toward the lower end of the range. It now looks more likely that price could break below the $65,000 support and move lower in the near term. Resistance is at $75,000, $80,000, and $85,000, while support is at $65,000, $60,000, and $55,000.

This Week’s Focus

• Monday: U.S. Retail Inventories Ex Auto (Feb) and Fed Chair Powell Speaks
• Tuesday: Japan Tokyo Core CPI and Industrial Production, Australia RBA Meeting Minutes, China Manufacturing PMI, U.K. GDP, Current Account and Nationwide HPI, E.U. CPI, U.S. Chicago PMI and CB Consumer Confidence
• Wednesday: Japan Tankan Large Manufacturers Index, Australia Building Approvals, E.U. HCOB Eurozone Manufacturing PMI and Unemployment Rate, U.K. S&P Global Manufacturing PMI, U.S. Retail Sales and S&P Global Manufacturing PMI
• Thursday: Australia Trade Balance, U.S. Trade Balance
• Friday: U.S. Nonfarm Payrolls and S&P Global Services PMI

Markets will start the week at a critical point, with U.S. equities falling sharply on Friday to yearly lows, USD/JPY moving toward 160, and oil holding around $100. The main focus remains the conflict in Iran, and with markets now pricing in a longer war, the risk of large moves is high as headlines from the region drive sentiment.

Friday will be especially important, with U.S. Nonfarm Payrolls released on the same day that Easter holidays begin in many parts of the world—this combination could lead to sharp volatility. Markets will also be watching closely for any signs of intervention from the Bank of Japan as USD/JPY approaches 160, with traders alert to the risk of sudden moves in the yen.

Bank of Japan struck a more urgent tone in the Summary of Opinions from its March meeting, warning of the risk of “falling behind the curve” if policy tightening lags underlying inflation dynamics. With real interest rates still deeply negative and price pressures showing signs of persistence, policymakers acknowledged that delayed action could eventually force more rapid and disruptive tightening, posing a greater risk to the economy.

While the baseline remains "gradually proceeding with rate hikes", the discussion revealed growing openness to adjusting the pace of hikes. Members indicated that rate increases may need to proceed “without long intervals between adjustments” and, if necessary, “without hesitation,” particularly if inflation trends continue to firm. This marks a subtle but important shift from a purely cautious stance toward a more proactive tightening approach.

A key concern is the rising risk of second-round effects. BoJ noted that wage growth is gaining traction amid labor shortages, while firms are increasingly passing through higher costs, amplified by "excessive depreciation of the Yen". The combination of stronger wage-price dynamics and a weaker currency is seen as increasing the likelihood that underlying inflation could exceed the 2% target in a sustained manner.

While higher oil prices could weigh on growth, policymakers stressed that the current environment still supports an ongoing uptrend in prices. In this context, Yen weakness becomes a critical factor, as further depreciation could intensify imported inflation and force the BoJ to accelerate tightening beyond its current projections.

Full BoJ Summary of Opinions here.

S&P 500: ⬇️ Sell

• S&P 500 broke strong support level 6440.00
• Likely to fall to support level 6225.00

S&P 500 index recently broke below the strong support level 6440.00 (which stopped the previous impulse wave 5 in March) and the 61.8% Fibonacci correction of the upward impulse from August.

The breakout of the support level 6440.00 should add to the bearish pressure on this index.

S&P 500 index can be expected to fall further to the next support level 6225.00 (former strong support from July and August of 2025).

Global markets have entered a definitive “Judgment Week” for the Federal Reserve, where the future of the 2026 interest rate path will be tested against a backdrop of $110 oil. Following February’s shock loss of -92k jobs, the Friday NFP report serves as the final verdict on whether the U.S. labor market is merely cooling or officially freezing. However, the Fed remains trapped in a “Dual-Mandate Deadlock”. Any outcome other than a "Goldilocks" NFP print could force the FOMC into a public policy brawl—pitting the necessity of a growth-saving pause against the "Volcker-script" requirement to crush resurging inflation.

The High-Stakes Events: The Evidence on Trial

1. The Verdict: US Nonfarm Payrolls (NFP) & Unemployment (Friday, April 3)

After the -92k contraction in February, the Fed is praying for a "Goldilocks" stabilization. A print between +50k and +80k, and even better with revision to January's figure, allows them to maintain their "Hawkish Hold," dismissing the 4.4% unemployment rate as a "normalization."

The Panic Trigger: Another contraction (e.g., -50k) would prove the labor market is in a freefall. However, the Average Hourly Earnings (exp. 0.4% mom) is the "Stagflation Trap" within the data; if jobs vanish but wages stay high, the Fed cannot cut rates without surrendering to inflation.

2. The Star Witness: ISM Manufacturing Index (Wednesday, April 1)

While NFP is the result, the ISM tells us why it’s happening. The Prices Paid sub-index is the most critical metric here. If it remains elevated above 70 while New Orders fall below 50, it confirms the "Stagflation Filter." This signals that "cost-push" inflation from the Middle East is filtering into the supply chain, a scenario the Fed cannot fix with traditional interest rate tools.

3. The Global Catalyst: Eurozone Flash CPI (Tuesday, March 31)

The Flash CPI on Tuesday is arguably the most pivotal data point for the Euro since the start of the conflict. While the market consensus is currently set for a jump toward 2.4%, the "whisper" expectation is shifting even higher due to the disruptions in the Strait of Hormuz. If Tuesday's print hits 2.4% or higher, it will be seen as a "call to action" and solidify the case for an April ECB hike. Also, A high March CPI effectively turns June from a "maybe" to a "certainty" for the market.

The Silent Movers: The Shadow Risks

1. Germany’s Flash CPI (Monday, March 30)

As the Eurozone’s largest economy, Germany is the "canary in the coal mine." Because it reports 24 hours before the aggregate Eurozone data, a "beat" here will trigger an immediate front-running of the Euro. It serves as the early-warning system for whether the energy shock has already become entrenched in European economy.

2. RBA Monetary Policy Minutes (Tuesday, March 31)

Traders are looking for the "split" details. The previous meeting was a 5-4 vote; if the minutes lean hawkish due to "capacity pressures," the AUD could see renewed strength.

3. JPY Tankan Survey (Wednesday, April 1)

This is the definitive look at Japan’s business sentiment. With Japan’s headline CPI at a two-year low (1.3%), any weakness in the Tankan could provide the Bank of Japan with an excuse to delay normalization.

Highlights for the week: