Market Review – Fundamental Perspective 13 March 2018

Asian equity markets adopted a cautious tone in a muted session yesterday following a dip in US equities as the S&P 500 Index slipped overnight following its biggest rally in five weeks. In FX, the USD gained broadly across the board, but NZD was the key outperformer overnight as it rallied against all G10 peers after the government bond auction drew strong demand.
In Europe, ministers at the Ecofin meeting are to discuss the European Union’s Brexit position and attempt to agree on measures that further reduce risks in the banking sector. They are also expected to agree on draft transparency rules for tax planning intermediaries.
In the UK, the Chancellor of the Exchequer, Philip Hammond will present the final 2018/19 budget in his Spring Statement, which will be based on the November 2017 Autumn Budget.
We expect GBPUSD price action to remain fairly muted, with short term support at 1.3875 and 1.3780 with resistance at 1.3950 and 1.4070. We expect to see continued GBP demand on dips from the Real-Money and Corporate client-base.
Focus turns to the US inflation report today, with markets closely watching for hints on the pace of Federal Reserve policy tightening ahead of the Federal Reserve’s policy meeting next week. Barclays Research expects headline inflation to rise to 2.1% y/y but forecast some reversal of the strength in January’s core rate, predicting an increase of 1.7% y/y.
In FX, our traders have noted better selling of EUR following the ECB last week, suggesting cleaner positioning in the single currency. For EURUSD, our traders see near-term trading ranges between 1.2275-1.2360/70 with broader levels around 1.2100-1.2450.

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