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Daily Pivots: (S1) 0.9539; (P) 0.9562; (R1) 0.9593; More....

Intraday bias in EUR/CHF remains neutral as consolidations continue below 0.9660. Further rally is expected as long as 0.9489 support holds. Sustained trading above 100% projection of 0.9204 to 0.9516 from 0.9331 at 0.9643 will pave the way to 161.8% projection at 0.9836 next.

In the bigger picture, prior strong break of 55 W EMA (now at 0.9487) is a medium term bullish sign. Sustained break trading above long-term falling channel resistance (at around 0.9620) would suggest that the downtrend from 1.2004 (2018 high) has bottomed at 0.9204. Stronger rally should then be see to 0.9928 key resistance at least.

Daily Pivots: (S1) 1.0806; (P) 1.0862; (R1) 1.0908; More...

Intraday bias in EUR/USD is mildly on the downside. Pull back from 1.0953 short term top would extend to 38.2% retracement of 1.0358 to 1.0953 at 1.0726. Strong support should be seen there to bring rebound. Meanwhile, break of 1.0953 will resume the rally from 1.0176 towards 1.1274 key resistance.

In the bigger picture, prior strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

Daily Pivots: (S1) 1.2930; (P) 1.2973; (R1) 1.3009; More...

Intraday bias in GBP/USD remains neutral for the moment. On the downside, firm break of 1.2910 support should confirm short term topping, on bearish divergence condition in 4H MACD. In this case, intraday bias will be back on the downside for near term channel support (now at 1.2786). On the upside, though, above 1.3013 will resume the rally from 1.2099 towards 1.3433 high.

In the bigger picture, up trend from 1.3051 (2022 low) is not completed. Resumption is expected after corrective pattern from 1.3433 completes. Next target will be 1.4248 key resistance. This will now remain the favored case as long as 1.2099 support holds.

Daily Pivots: (S1) 148.32; (P) 148.64; (R1) 149.10; More...

USD/JPY's corrective pattern from 146.52 is still extending and intraday bias stays neutral. In case of stronger recovery, upside should be limited by 150.92 support turned resistance. On the downside, firm break of 148.17 support will bring retest of 146.52 first. Sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will resume the fall from 158.86 to 139.57 support.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8768; (P) 0.8806; (R1) 0.8855; More…

Range trading continues in USD/CHF and intraday bias remains neutral. While stronger recovery cannot be ruled out, upside should be limited by 0.8911 support turned resistance. On the downside, break of 0.8757 will resume the fall from 0.9200 to 61.8% retracement of 0.8374 to 0.9200 at 0.8690. Sustained break there will pave the way back to 0.8374 support.

In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

Daily Pivots: (S1) 0.6261; (P) 0.6313; (R1) 0.6354; More...

No change in AUD//USD outlook and intraday bias stays neutral. On the downside, break of 0.6268 will bring deeper fall to 0.6186 support. Firm break there will target a retest on 0.6807 low. On the upside, firm break of 0.6407 will resume the rebound from 0.6087.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6482) holds.

Markets

European markets unlike their US counterpart had a pessimistic view on the Fed’s policy decision. While the latter took comfort from chair Powell’s reassuring message during the presser, the former seem to eye the stagflationary risks in the updated forecasts. Stocks, core bond yields and the euro dropped. Sentiment then took a turn for the better around the start of US dealings. News of the EU delaying retaliatory tariffs until mid-April (from April 1) to allow for dialogue helped the turnaround, as did way stronger than expected housing data a bit later. Equities in Europe bottomed though still finished 1% lower in the close. WS shrugged off most of the initial contagion losses during the US session. European yields cut their previous losses in half, ending around 2-3 bps lower in a daily perspective. US rates (almost) fully wiped out declines of up to 7 bps. EUR/USD bounced off 1.082 to close at 1.085. Sterling rose as high as EUR/GBP 0.835 before paring some of those gains to 0.837. The labour market report was a tad better than anticipated and the Bank of England held rates steady. A deeper dive in the 8-1 split vote (one member voting for a cut) showed two policymakers who voted for cuts at all three previous meetings taking a cautious turn by supporting the rates hold. UK money markets pared some of the easing bets from more than to slightly below two rate cuts this year.

Asian (and more specially Chinese) risk-off is set to spillover in some degree to Europe with stock futures pointing at a 0.4% lower open. Risk sentiment will probably remain key for markets in absence of an inspiring economic calendar and ahead of the weekend. We expect technical trading in FX and FI markets. The dollar is trying to build on a bottoming out process with DXY attacking the 104 resistance area. EUR/USD is correcting lower for a third day but should find support around 1.08. The US 10-yr yield holds tight in a narrow sideways trading range while the 10-yr EU swap grinds lower. The January high at 2.63% serves as a strong support. The unpredictable tariff narrative appears to gain some traction again as the April 2 reciprocal date draws closer. The EU’s olive branch yesterday was answered by White House press secretary Leavitt with renewed “big tariff” threats. Yesterday’s EU summit revealed some divisions, first and foremost with Hungary again opposing the €5bn in Ukrainian aid. Southern countries are seeking a broader definition in terms of what to include under “defense spending”, which is exempted for 1.5% of GDP from the deficit rules. French president Macron late yesterday announced a new summit in Paris next week during which he is looking for a coalition of the willing.

News & Views

In a speech in Calgary yesterday, Tiff Macklem elaborated on the difficult context that the central bank is facing due to uncertainty surrounding US tariffs on Canadian imports. The Bank of Canada governor indicated that it could be appropriate for the bank consider a range of economic estimates rather than one single forecast. He also pointed to the dangers of adjusting policy too quickly based on an uncertain outlook. In the current environment policy should be less forward looking until the situation is clearer and then act more quickly ‘when things crystallize’. This at least suggest the BOC is moving to a wait-and-see approach. Macklem nonetheless indicated that there should be no doubt that the BOC stays committed to low inflation. The Bank wants to avoid that higher import costs due to the deprecation of the currency and retaliatory tariffs will spread to consumer prices and affect the anchoring of inflation expectations. The impact of the tariffs war limits the Banks’ room to support the economy. The market currently only sees about a 35% for an additional 25 bps BOC rate cut next month.

British consumers’ moral in March turned slightly more positive for the third consecutive month. The GFK consumer confidence index improved from -20 to -19 to be compared to short-term low of -22 in January. Even so, the indicator remains well below the long-term average near -10. Consumers turned slightly more optimistic about the economic situation, both in the last 12 months (-42 from -44- and also for the next 12 months (-29 from –31). At the same time consumer again turned less positive on their personal finances. "The current stability is to be welcomed but it won't take much to upset the fragile consumer mood," Neil Bellamy, consumer insights director at GfK was quoted.

A big week of central bank decisions is coming to an end with the central bankers bathing in uncertainty of the tariffs and the economic implications of the rapidly escalating trade war. The Federal Reserve (Fed) maintained rates unchanged this week, cut its growth projections, lifted its inflation forecasts, said that a tariff-led pick up in inflation would be ‘transitory’ and decided to reduce the pace of QT. Then, the Riksbank maintained status quo while signalling the end of policy easing, the Bank of England (BoE) kept its policy unchanged, meanwhile, the Swiss National Bank (SNB) announced a much expected 25bp cut in an effort to counter the franc’s appreciation when inflation sits at 0.4% on a yearly basis. As a result, the franc and sterling fell on SNB’s rate trimming and BoE’s uncertain outlook respectively. The SMI gained in a session that saw the major European indices offered, while the FTSE 100 closed flat, outperforming most of the European index complex hit by an overall pessimism.

The US stock markets couldn’t extend the Fed optimism into a second session as FedEx – that’s results are seen as an indicator of economic health – lowered its profit forecast for the third straight quarter. The rapid loss of appetite hints that there is a stronger case for a further selloff in US stocks than a sustainable rebound. But the good news is that a period of economic slowdown doesn’t necessarily mean lower asset prices; the central bank policies tend to be supportive of asset valuations in periods of economic slowdown.
Rotation trade gives signs of slowing

Capital flows toward the European equities were the major theme of the Q1 but flows toward the European equities and the euro could start slowing in Q2 as many investors now consider that most of the upcoming European infrastructure and defence spending is already priced in. Consequently, the EURUSD may have consumed its short-term upside potential and could opt for a deeper downside correction before finding the courage to rechallenge the 1.10 offers. Elsewhere, the yen is softer this morning against the dollar on the back of softer-than-expected inflation figures in February. The US dollar weakness that started by mid-January could be gently coming to a bottom and we could see a rebound in the US dollar across the board.

Another leg of the rotation trade is also showing signs of weakness this week. The Hang Seng index was down more than 2% yesterday and shed another 2.40% today on the waning stimulus-backed purchases and the tariff shenanigans. Chinese technology stocks have room to close the gap with the Nasdaq 100 stocks for the next three months but the gains could be vulnerable to a global selloff.

Appetite loss and rising inflation expectations back oil and gas stocks. While oil companies are dealing with lower oil prices, they are lucky enough to be in a sector that will be explicitly be supported by the Trump administration for about four more years, they pay good dividends, they offer strong buybacks, and they could simply ditch their expensive plans of green transition to focus on money-making traditional fossil-fuel business. SPDR’s energy sector fund has been outperforming the S&P500 peers since the beginning of the year and should see stable inflows from investors looking to hedge against the risk of surging global inflation.

In focus today

Germany's fiscal package is anticipated to pass in the Bundesrat, potentially delivering the largest fiscal boost to the German economy in over three decades. The package has the backing of a two-thirds majority, including the CDU/CSU, SPD, Greens and Bavarian Free Voters. For insights into the implications, read our analysis: Research Germany - Fiscal policy to boost growth but also inflation concerns, 19 March.

In the broader euro area, focus turns to the euro area consumer confidence indicator for March. This is one of the important data points ahead of the ECB meeting in April as consumer's mood and thus private consumption is key for the growth outlook in the euro area. Following declining confidence at the end of last year confidence has partly rebounded in the first months of 2025 and is expected to have increased further in March.

Economic and market news

What happened overnight

In Japan, core inflation rose to 3% y/y slightly exceeding the expectations of 2.9% y/y. Headline inflation eased to 3.7% y/y from 4% seen last month, although significantly above the BoJ's 2% target. The data print paves the way for considering further rate hikes by the BoJ. Food prices remain the most important inflation driver, while core price pressures are modest. The local Tokyo data for February indicates this trend has not changed. The big question is whether it will, once consumers gain purchasing power after an expected wage bump this spring.

What happened yesterday

In the central bank space, the Riksbank, the Bank of England (BoE) and the Swiss National Bank (SNB) all moved forward with rates that met market expectations.

The Riksbank stayed on hold at 2.25% and presented a flat rate path. We continue to expect the Riksbank will be on hold from here. Read more in our Riksbank - March 2025: Unchanged at 2.25% and flat policy rate path - as expected, 20 March.

The BoE kept the Bank Rate unchanged at 4.50%, with a hawkish vote split of 8-1 for unchanged (1 for cut). The central bank maintained its previous guidance noting that monetary policy will need to remain restrictive until risks to inflation returning to the 2% level have dissipated. Although the vote split was slightly to the hawkish side, nothing indicated a broad shift in sentiment within the MPC. We expect the next 25bp cut in May with the Bank Rate ending the year at 3.75%. While we have previously highlighted that we saw the risks skewed towards a swifter cutting cycle in 2025, we now see the risk picture as more balanced. See more in Bank of England Review - Slow and steady, 20 March.

The SNB delivered a 25bp cut, bringing the policy rate to 0.25%. Overall, the SNB stuck to its previous guidance noting that it "remains willing to be active in the foreign exchange market as necessary" and that the SNB "will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term". While marginally adjusting the conditional inflation forecast upwards, the SNB signalled that risks are skewed to the downside for both the inflation and growth outlooks. We stick to our call of final cut to the policy rate of 25bp at the next meeting in June, which would bring the policy rate to 0%.

In the UK, the January/February jobs report met expectations. Wage growth excluding bonuses remained elevated at 5.9% and the unemployment rate likewise remained at 4.4% for the three months to January. The data supports the BoE's gradual approach to easing monetary conditions.

In Norway, the regional survey from Norges Bank showed capacity utilisation rising from 34 to 35. Both wage growth expectations and employment growth expectations marginally exceeded the central bank's own expectations, although wage growth expectations have decreased since the last survey- pointing towards a gradually disinflationary trend ahead.

Equities: Global equities were lower yesterday across regions, with cyclicals underperforming and yields moving lower. This occurred on a day with several policy meetings and important macroeconomic data releases. The monetary outcomes were very close to expectations, and the macroeconomic data, in our perspective, was very positive when considering all the signals. Hence, it is somewhat counterintuitive to see risky assets underperforming.

We are, of course, aware of the substantial political impact these days, and we could also attribute yesterday's lack of investor optimism to political factors. That being said, we observed the VIX moving lower, the MOVE index is far from its highs two weeks ago, and other asset classes are behaving well. Therefore, without the significant uncertainty related to politics, we should expect positive equity markets.

In the US yesterday, the Dow was down 0.03%, S&P 500 down 0.2%, Nasdaq down 0.3%, and Russell 2000 down 0.7%. Asian markets are mostly lower this morning, with Japan going against the trend. Again, there is no adverse macro data to highlight, rather the opposite, with fears of tariffs being mentioned as the reason for lower stock prices. US and European futures are marginally lower, suggesting volatility sliding further.

FI&FX: EUR/USD dropped below 1.09 yesterday on a day marked by sour risk sentiment in equity markets and declining bond yields. This development also benefitted the JPY, while CHF lost ground after the SNB cut interest rates. In Scandies, expectations of a Norges Bank rate cut next week were on retreat yesterday after the release of the Regional Network Survey, which further help NOK higher. The Riksbank kept interest rates unchanged.

Daily Pivots: (S1) 1.4290; (P) 1.4346; (R1) 1.4379; More...

Intraday bias in USD/CAD remains neutral as range trading continues. On the downside, break of 1.4238 support will argue that corrective pattern from 1.4791 has started the third leg already. Intraday bias will be back on the downside for 1.4150 support and below. On the upside, though, break of 1.4541 will resume the rebound from 1.4150, as the second leg of the pattern.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.