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A steady stream of economic data will flow through the financial markets on Friday, with reports on UK factory output and Canadian employment set to draw the most headlines.

Action begins at 07:45 GMT with a report on French industrial output. A similar report will be produced in Italy later in the morning.

The United Kingdom's Office for National Statistics will also release a spate of economic indicators on Friday, including industrial production, manufacturing production and the total trade balance. Industrial output is forecast to fall 0.9% in December, while manufacturing is expected to grow 0.3% month-on-month.

Analysts are projecting a total trade deficit of £2.4 billion for December, down from £2.8 billion the month before.

North American trading kicks off with a report on Canadian employment at 13:30 GMT. The Canadian economy is forecast to have added 10,000 jobs in December, following a net gain of 78,600 the month before. The unemployment rate is expected to rise slightly to 5.8% from 5.7% even as workforce participation wanes.

In the United States, the Commerce Department will report on December wholesale inventories at 15:00 GMT. The data series is used in the calculation of gross domestic product (GDP).

Earlier in the day, the Chinese government produced weaker than expected inflation data for the month of January, raising some concerns about the health of the world's second largest economy.

Beijing's consumer price index (CPI) rose 0.6% in January, which was slightly lower than the 0.7% reading forecast by economists. In annual terms, CPI inflation slipped to 1.5% from a previous reading of 1.8%.

The producer price index (PPI) slipped to an annualized rate of 4.3% in January, compared with 4.9% the month before.

EUR/USD

The euro continued to backtrack against the dollar on Thursday, as prices fell below 1.2300 for the first time in more than two weeks. The EUR/USD exchange rate was last seen trading at 1.2258, where it was little changed compared to the previous close. Support levels are located at 1.2210. On the flipside, resistance is likely found at 1.2295.

GBP/USD

The British pound spiked on Thursday on hawkish commentary from the Bank of England (BOE) before quickly surrendering gains. Cable touched a session high of 1.4059 before falling back down to 1.3900. It was last seen trading at 1.3938. The GBP/USD faces immediate support at the psychological 1.3800 level. On the opposite side of the spectrum, immediate support is located at the daily high.

USD/CAD

The US dollar extended gains against its northern rival on Thursday, with the USD/CAD climbing to fresh six-week highs. The pair was last seen trading just below 1.2600, with momentum on the side of the bulls.

Currency pair GBP/USD

The GBP/USD is probably still in a wave 4 (green) correction. A break above the resistance (red) could indicate a bullish rally whereas a bearish break below support (green) would make this wave analysis unlikely and could indicate a potential downtrend.

The GBP/USD made a strong move up but fell equally hard. Still, the pattern could be a wave 1-2 (grey) although a break above resistance (red) is needed before that becomes more likely. A break below the bottom of wave 1 invalidates the wave 1-2.

Currency pair EUR/USD

The EUR/USD remains in a bearish channel which is probably part of a wave 4 (purple) correction as long as price stays above the Fibonacci levels (purple). A break above resistance (red/orange) could see the start of a wave 5 (purple). A break below the 50-61.8% Fib support makes a wave 4 less likely.

The EUR/USD indeed made one more lower low within a wave 4-5 (orange). The bullish bounce could indicate a potential bullish wave 1-2 (blue) but price would need to break above resistance to confirm a potential wave 3 (blue) breakout.

Currency pair USD/JPY

The USD/JPY is still trapped in between strong support (green/blue) and resistance (red/orange). Price could be building a wave 1-2 (purple) pattern but a bullish break is needed. A bearish break below the bottom and 100% Fib invalidates the wave 2 (purple).

The USD/JPY needs to break above resistance (red) before an uptrend continuation is likely.

The global equity markets are bracing themselves for a stormy closing session this week, as data from Thomson Reuters' Lipper unit shows US fund investors withdrew the largest amount from US-based equity exchange-traded funds on record. The amount totals $23.9 billion coming out of equity ETFs in the week. The reason cited by the research unit was the overbought conditions, with a correction overdue. Asian stock markets fell overnight, as the Nikkei finished down 2.32% at 21382.62, but off the session low of 21119.00. The Chinese Shanghai Composite was down 5.07% at the time of writing, off its low of 6% earlier. Last Friday saw substantial selling, as fear took over, with a stronger follow through on the market open Monday.

German Current Account n.s.a. (Dec) was €27.8B v an expected €25.0B, from a previous €25.4B. Exports (MoM) (Dec) were 0.3% v an expected -1.0%, from 4.1% previously. Imports (MoM) (Dec) were 1.4% v an expected -0.5%, from 2.3% previously. Trade Balance s.a. (Dec) was €21.4B v an expected €21.7B, from a prior €22.3B. EURUSD moved higher from 1.22633 to 1.22943 because of this data release.

German Buba President Weidmann spoke on Monetary Policy in the European Context at the Monetary and Economic Policies on both sides of the Atlantic conference in Frankfurt. He said that a substantial extension of ECB QE is not justified if growth continues as expected. Euro appreciation is unlikely to jeopardise expansion and there is no sign of Eurozone growth abating anytime soon. The recent German wage deal supports expectation for gradually rising inflation. ECB policy should not remain loose beyond QE and should not be unsettled by the recent stock market sell-off.

RBA Governor Lowe spoke at the A50 Australian Economic Forum in Sydney. He stated that there is no strong case for near-term adjustment in policy and that rates will only rise on further progress with jobs and inflation. He added, it is likely that next Australian interest rate move will be up and quarterly economic forecasts are largely unchanged, and that progress in cutting the jobless rate and lifting inflation will be gradual. Volatility in stocks hasn't affected the RBA growth outlook, he said, and Australia does not have to tighten in ‘lock-step' with other central banks. The RBA are still carefully watching high household debt levels and the forecast for GDP growth is a bit above 3% over the next two years. Finally, a lift in wage growth is ‘likely to be necessary' to meet inflation goals.

The Bank of England Interest Rate Decision was left unchanged at 0.5%, as expected. The BOE Minutes, BOE Quarterly Inflation Report and the Monetary Policy Statement were released at the same time. The BOE Asset Purchase Facility was maintained at £435B. The BOE MPC Vote remained unchanged at 9. GBP crosses saw a spike in volatility after this data was released.

Canadian Housing Starts s.a. (YoY) (Jan) were 216.2K v an expected 210K, from a previous 217K. USDCAD continued its decline to 1.25453 from 1.25696.

US Initial Jobless Claims (Feb 2) were 221K v an expected 232K, from a previous 230K. Continuing Jobless Claims (Jan 26) were 1.923M v an expected 1.945M, from 1.953M previously. USDJPY moved up to 109.720 before resuming its decline to 109.239.

US FOMC Member Kaskari spoke in South Dakota, saying it's too soon to know if tax cuts will boost wage and hiring. Trust in the US may eventually erode amid rising debt. Deficit and debt are not currently near-term issues but this may change. The US is a long way away from wages and inflation rising. There is consistent wage growth needed to have an impact on rates. The bond market is signalling inflation is going to be under control, well into the future. If the tax cut does not lead to more optimism, it could be a net positive for the US economy.

Canadian BOC Governing Council Member Wilkins spoke on innovation and inclusive growth at the G7 Symposium in Quebec. She stated that high household debt is the biggest vulnerability to the economy, followed by NAFTA. The BOC is also factoring in the rest of the economy's performance as it sets policy. Some households may find debt service extremely difficult but, overall, the bank expects economy and consumption to continue to grow. The quarter didn't get off to the strongest start, in line with expectations; the bank is data dependent. The rising stock market volatility, in the context of a strong economy and rising bond yields, is to be expected. The asset prices feed through to monetary policy transmission mechanism and forecasts but this only matters to the extent they are in one direction and large. The bank looks at market pricing but it is rarely a source of concern and the focus is on setting the right policy to achieve its inflation target. There is often more potential being built in an up cycle than economists put in their projections.

Australian RBA Monetary Policy Statement was released this morning. Also released at this time was Home Loans (Dec) coming in at -2.3% v an expected -1.1%, from a previous 2.1%, which was revised down to 1.6%. Investment Lending for Homes (Dec) came in at -2.6% v a previous 1.5%. AUDUSD sold down from 0.77859 to 0.77706 after this data was made public.

Chinese Consumer Price Index (YoY) (Jan) was as expected at 1.5% from 1.8% prior. Producer Price Index (YoY) (Jan) was 4.3% v an expected 4.4%, from 4.9% previously. Consumer Price Index (MoM) (Jan) was 0.6% v an expected 0.7%, from 0.3% previously.

Japanese Tertiary Industry Index (MoM) (Jan) was -0.2% v an expected 0.2%, from 1.1% previously.

Swiss Unemployment Rate s.a. (MoM) (Jan) remained unchanged, as expected, at 3%.

EURUSD is up 0.11% overnight, trading around 1.22601.

USDJPY is up 0.19% in early session trading at around 108.947.

GBPUSD is up 0.36% to trade around 1.39614.

USDCNH is down -0.31% overnight, trading around 6.34260.

Gold is up 0.11% in early morning trading at around $1,320.10.

WTI is down -3.31% this morning, trading around $60.20.

Major data releases for today:

At 09:30 GMT, UK Industrial Production (YoY) (Dec) is expected to be 0.3% from a previous 2.5%. Manufacturing Production (MoM) (Dec) is expected to be 0.3% from 0.4% previously. Industrial Production (MoM) (Dec) is expected to be -0.9% from 0.4% previously. Manufacturing Production (YoY) (Dec) is expected to be 1.2% from 3.5% previously. GBP pairs could move because of this data release.

At 10:30 GMT, the Russian Interest Rate Decision will be released. The expectation is for a drop to 7.50% from 7.75%. This could affect the pricing in RUB crosses.

At 13:00 GMT, the UK NIESR GDP Estimate (3M) (Jan) is expected to be 0.3% from 0.6% prior. GBP may be exposed to price volatility from this data release.

At 13:30 GMT, Canadian Unemployment Rate (Jan) is expected to be 5.8% from a previous 5.7%. Participation Rate (Jan) is expected to be 65.7% from 65.8% prior. Net Change in Employment (Dec) is expected to be 10.0K from a prior 78.6K. CAD pairs could see an increase in price movement from this data.

At 16:45 GMT, UK MPC Member Cunliffe will be speaking at the Asset Management Derivatives Forum in California. GBP crosses may experience volatility around this time in reaction to his comments.

At 18.00 GMT, the Baker Hughes US Oil Rig Counts will be released, with a headline number from last week of 765. The expected number this week is 758. WTI Oil could become volatile around this data release and will be in traders' minds when trading resumes on Monday.

Market movers today

A very quiet day in terms of major economic data releases.

See next page for market movers in Scandi today.

Selected market news

Bank of England (BoE) sent a more hawkish message than we and markets had expected, as it is concerned about overheating the economy. This is also the reason why we now expect the BoE to hike by 25bp already in May (although admittedly it is a somewhat close call between May and August ) and launch a hiking cycle.

EUR fixed income markets fluctuated quite a lot during yesterday's trading session. On the back of BoE hawkish message yields climbed higher. However, later in the afternoon spillover from risk off sentiments in equity markets weighed in yields, e.g. with the equity volatility index VIX increasing from around 25 to above 30 yesterday after the index has been t rending lower since the major risk-off day in the financial markets on Monday. Overnight , the risk-off sentiments in equity markets continued with Asian stock markets in red.

In the US, Fed nominee Goodfriend was approved by the senate banking committee yesterday. The vote was 13-12, making it a close call whether he will be approved by the full Senate, where the Republicans only has a very slim majority 51-49.

Yesterday, Fed's William Dudley said in a Bloomberg interview, that ‘the little decline that we've had in the equity market today has virtually no implications for the economic outlook', indicating (as expected) that the Fed is seeing through the current market turmoil – it has to be more persistent for the Fed to become concerned.

The US Government entered a partial shutdown as Congress missed the midnight deadline to pass the two-year spending bi ll announced on Wednesday. The House and Senate plan votes early Friday morning. The USD300bn two-year spending bill also includes a suspension of the debt limit until March 2019, meaning Treasury can start rebuilding its cash buffer again, which will drain USD liquidity if passed.

Headlines/Economic Data

General Trend

Shanghai Composite and Hang Seng decline over 4%

Currency volatility relativity muted vs equities

Australia/NewZealand

ASX 200 opened -0.4%: closed -0.9%%

Energy -2.4%,Telecom -1.8%, Utilities -1.8%, Consumer Discretionary -1.6%, Resources -1.2%, Financials -0.9%

(AU) RESERVE BANK OF AUSTRALIA (RBA) QUARTERLY STATEMENT ON MONETARY POLICY (SOMP): QUARTERLY INFLATION AND GROWTH FORECASTS LITTLE CHANGED

(AU) Australia Dec Home Loans M/M: -2.3% v-1.0%e; Investment Lending: -2.6% v +1.5% prior

(AU) Australia sells A$400M v A$400M indicated in July 2022 bonds, avg yield 2.2838%, bid to cover 5.79x

China/Hong Kong

Shanghai Composite opened -2.7%, Hang Seng -2.5%

Hang Seng Materials Index -4.9%, Services -4.1%

(CN) CHINA JAN CPI M/M: 0.6% V 0.3% PRIOR: Y/Y:1.5% V 1.5%E

(CN) China Jan PPI Y/Y: 4.3% v 4.3%e

(CN) China won’t face big inflationary pressure in 2018 – China Securities Journal

(CN) PBOC SETS YUAN REFERENCE RATE AT 6.3194 V 6.2822 PRIOR

(CN) China PBoC: Skips OMO (12th straight session)

(CN) PBoC: Has released Temporary liquidity worth almost CNY2.0T (under previously announced measures); measure seeks to satisfy cash demand before Lunar New Year; Previously announced targeted RRR cuts inject about CNY450B in liquidity.

(CN) China to cut gasoline by CNY170/ton - Press

Looking Ahead: China Jan Bank Lending data maybe released during the European session

Japan

Nikkei 225 opened -1.8%; closed -2.3%

TOPIX Electric Appliances Index -3.4%, Iron & Steel -3.3%, Securities -3%,Real Estate -3%

Nissan Motors [7201.JP]: Declines over 3.5%after revising FY guidance

Nexon [3659.JP]: Gains over 14% after reporting FY results and announcing stock split

Nikkei 225 Feb options said to settle at 21,190

Japan PM Abe Adviser Hamada: Recent stock declines could make BoJ cautious about raising rates

Japan Fin Min Aso: Various factors are behind stock market moves; US and global economy’s fundamentals are‘not bad’

BOJ announcement related to daily bond buying operation: leaves amounts unchanged

Korea

Kospi opened -2.5%

Samsung Electronics has declined by over 2.5%

(KR) South Korea Fin Min Official: Will take action to stabilize financial markets should uncertainties spread; to strengthen monitoring of FX market

Other Asia

(PH) Philippines Dec Trade Balance: -$4.0B(multi-year high for the deficit) v -$3.0Be

(PH) Philippines Central Bank(BSP) Gov Espenilla comments after central bank left rates unchanged on Thursday: ‘Inflation spike’does not warrant immediate tightening

North America

US equity markets ended lower: Dow -4.2%, S&P500 -3.8%, Nasdaq -3.9%, Russell 2000-2.9%

S&P500 Financials -4.4%, Technology -4.1%

(US) Fed's Dudley (dove, FOMC voter): Decline inequity markets doesn't have economic implications at this point; so far stock selloff has been 'small potatoes'; Main outlook for three rate hikes is reasonable; could do four hikes if economic outlook gains; Bond yields moving higher is putting pressure on stocks; US govt debt service costs are likely to rise a lot - TV interview

(US) Fed's George (hawk): 3 rate hikes for 2018 and 2019 would be reasonable unless economic outlook changes

(US) TREASURY'S $16B 30-YEAR BOND AUCTION DRAWS 3.121%; BID-TO-COVER RATIO: 2.26 V 2.23 PRIOR AND 2.25 AVG OVER THE LAST 4 AUCTIONS (highest yield since March 2017, lowest BTC since Nov)

(US) House GOP Leaders say next votes [related to funding] to come after 12 AM EST government funding deadline - US financial press

(US) Office of Management and Budget (OMB) said to direct agencies to prepare for possible shutdown if Congress cannot pass funding bill by the midnight deadline – Washington Post

(US) President Trump expected to propose reducing some drug costs for Medicare - US press

(US) US said to consider 'emergency' support for coal plants - US financial press

Levels as of01:00ET

Hang Seng -3.5%;Shanghai Composite -4.8%; Kospi -1.8%

Equity Futures:S&P500 +0.3%; Nasdaq100 +0.2%, Dax +0.3%; FTSE100 +0.3%

EUR 1.2240-1.2265 ;JPY 108.49-109.11; AUD 0.7758-0.7794 ;NZD 0.7198-0.7231

Feb Gold flat at $1,319/oz;Feb Crude Oil -1% at $60.53/brl; Mar Copper -0.2% at $3.067/lb

Daily Pivots: (S1) 151.01; (P) 152.06; (R1) 152.79; More...

GBP/JPY's decline resumed after brief consolidation and intraday bias is back on the downside for 150.18 support. . Considering bearish divergence condition in daily MACD, the near term trend could have reversed. Break of 150.18 will affirm this case and target 146.96 key support level.

In the bigger picture, as long as 146.96 key support holds, medium term outlook remains bullish. Rise from 122.36 is in favor to extend to 61.8% retracement of 195.86 to 122.36 at 167.78. However, break of 146.96 support will indicate trend reversal. In that case, deeper fall would be seen to 38.2% retracement of 122.36 to 156.59 at 143.51 and then 61.8% retracement at 135.43.

Daily Pivots: (S1) 132.48; (P) 133.63; (R1) 134.34; More....

EUR/JPY's decline from 137.49 is still in progress and intraday bias remains on the downside for 132.04 cluster support first (23.6% retracement of 114.84 to 137.49 at 132.14). Decisive break there will indicate larger trend reversal on bearish divergence condition in daily MACD. On the upside, though, above 134.79 minor resistance will turn intraday bias neutral first.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). It should be targeting 141.04/149.76 resistance zone. On the downside, break of 132.04 support, however, will be an early sign of trend reversal and will bring deeper fall back to 124.08 key medium term support.

Daily Pivots: (S1) 1.5675; (P) 1.5709; (R1) 1.5771; More....

As long as 1.5633 minor support holds, further rise is expected in EUR/AUD. The breach of 1.5770 resistance suggests that medium term rise from 1.3264 is resuming. Sustained trading above 1.5770 will pave the way to 1.6587 key long term support. Nonetheless, below 1.5633 minor support will dampen this bullish case and turn intraday bias neutral first.

In the bigger picture, medium term rise from 1.3624 is not completed yet. Break of 1.5770 will extend the rise to retest 1.6587 (2015 high). However, considering bearish divergence condition in daily MACD, sustained break of 1.4949 cluster support (38.2% retracement of 1.3624 to 1.5770 at 1.4950) will indicate medium term reversal. And there is prospect of retesting 1.3624 low in that bearish case.

Daily Pivots: (S1) 0.8742; (P) 0.8791; (R1) 0.8851; More...

Despite steep fall from 0.8909, EUR/GBP is still bounded in range of 0.8686/8928. Intraday bias remains neutral for the moment. And, near term outlook will remain mildly bearish as long as 0.8928 resistance holds. On the downside, firm break of 0.8686 will resume whole decline from 0.9305. As 61.8% retracement of 0.8312 to 0.9305 should then be taken out too. Deeper decline would be seen to retest 0.8303/8312 support zone. Nonetheless, on the upside, break of 0.8928 will indicate near term reversal and turn outlook bullish for 0.9304 resistance.

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

Daily Pivots: (S1) 1.1407; (P) 1.1500; (R1) 1.1556; More...

EUR/CHF's decline extends to as low as 1.1445 so far and intraday bias is back on the downside. Current fall from 1.1832 is correcting medium term rise from 1.0629. Next target will be 1.1355 cluster support (38.2% retracement of 1.0629 to 1.1832 at 1.1372.) On the upside, break of 1.1639 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, a medium term top should be in place at 1.1832 on bearish divergence condition in daily MACD. But there is no indication of long term reversal yet. As long as 1.1198 resistance turned support holds, we'd still expect another rise through prior SNB imposed floor at 1.2000.