Overview: With the US warning about a "vertical escalation" by a stymied Moscow and the EU cautioning that Beijing may send semiconductors and other tech hardware to Russia, it is little wonder that risk appetites are being curtailed ahead of the weekend. Japan eked out a small gain, most of the major bourses in the Asia Pacific region were lower. Of note the Hang Seng's 2.4% fall left it virtually flat on the week. Europe's Stoxx 600 is flat after posting two consecutive losing sessions. US futures are narrowly mixed. Benchmark yields are a couple of basis points lower, putting the US 10-year around 2.36%. European yields are 2-4 bp softer. Following a firmer than expected Tokyo March CPI, the 10-year JGB yield rose to a new high, just shy of 0.24%. In the foreign exchange market, the cautious risk stance is evident with the yen and Swiss franc showing modest strength. An exception to the risk-off is the relative strength of emerging market currencies. The JP Morgan Emerging Market Currency Index is up for the fourth sessions to put the finishing touches on the second weekly advance. Turning to commodities, gold is consolidating above $1950 and is up about 2% this week. May WTI is off around 1.4% after falling 2.2% yesterday. Nevertheless, it is up about 7% this week. US natgas is softer, trying to snap a four-day advance. It was up almost 11% this week coming into today. Europe's natgas benchmark is more than 2% lower to pare this week's gain to about 6.5%. Iron ore rose 3.5% to recoup this week's loss. Copper is a little firmer to be flat on the week. The price of wheat is falling for a fourth session following a 5.2% rally to start the week. It is up less about 1% for the week. It had fallen around 12.3% in the previous two weeks. Asia Pacific Tokyo's CPI accelerated this month as the weaker yen and higher commodity prices fed through. The 1.3% headline increase was slightly stronger than expected. Excluding fresh food, the core measure edged up to 0.8% from 0.5%. Electricity, gas, and imported food lifted the core measure. Excluding fresh food and energy, the deflationary pressures slackened to -0.4% from -0.6%. Meanwhile, the 10-year JGB yield approached the 0.25% cap imposed by yield-curve control and a more active defense may be necessary next week. At the same time, Prime Minister Kishida has reportedly instructed the cabinet to put together a supplemental budget next week. China's Security Regulatory Commission is still apparently negotiating with the America's Public Company Accounting Oversight Board. Earlier this week, Chinese accounts made it seem that a deal was imminent that would allow mainland-based companies to remain listed on US exchanges. The issue are US laws that require audit reports to be made to authorities. Chinese authorities appear to make some concessions but wanted to withhold some "sensitive" data. If the US rules are flaunted for three years, the violator faces de-listing. That could begin in 2024. Reports suggest China has sent Russia 30k tons of alumina following Australia's ban that provided Russia's Rusal with 40% of its alumina supply. Another 30k tons are expected to follow quickly. The US and Europe have cautioned China against material support for Russia. However, officials say there is so far no evidence of Chinese assistance. The alumina deal is being cast as a commercial transaction rather than state sponsored. Meanwhile, China's lockdown this week of Tangshan (steel producing region) and Shandong (oil refineries) have knock-on effects that are disrupting the world's second-largest economy, with potential to further disrupt supply chains. The dollar is falling for the first time in six sessions. If the 0.66% pullback is sustained, it would be the largest loss since last November. Even with the decline, the greenback is up nearly 2% against the yen this week. The profit-taking began after the dollar had risen to almost JPY122.50 in North America yesterday. The pullback brings the dollar back to where it was in Tokyo on Thursday. Initial resistance is now seen near JPY122.00. The momentum readings are stretched, but the move does not seem complete. The Australian dollar set a new high for the year near $0.7535 before succumbing to some light profit-taking. It found support a little below $0.7500. Even with the pullback, it is the strongest of the major currencies this week, gaining almost 1.25%. The intraday technical indicators favor a recovery in North America. The US dollar slipped against the Chinese yuan for the second session but is still poised to extend its gain for the fourth consecutive week. The Chinese 10-year premium over the US narrowed by about 20 bp this week to 45 bp. The PBOC set the dollar's reference rate at CNY6.3739, a little above projections for...

Overview: With the US warning about a "vertical escalation" by a stymied Moscow and the EU cautioning that Beijing may send semiconductors and other tech hardware to Russia, it is little wonder that risk appetites are being curtailed ahead of the weekend. Japan eked out a small gain, most of the major bourses in the Asia Pacific region were lower. Of note the Hang Seng's 2.4% fall left it virtually flat on the week. Europe's Stoxx 600 is flat after posting two consecutive losing sessions. US futures are narrowly mixed. Benchmark yields are a couple of basis points lower, putting the US 10-year around 2.36%. European yields are 2-4 bp softer. Following a firmer than expected Tokyo March CPI, the 10-year JGB yield rose to a new high, just shy of 0.24%. In the foreign exchange market, the cautious risk stance is evident with the yen and Swiss franc showing modest strength. An exception to the risk-off is the relative strength of emerging market currencies. The JP Morgan Emerging Market Currency Index is up for the fourth sessions to put the finishing touches on the second weekly advance. Turning to commodities, gold is consolidating above $1950 and is up about 2% this week. May WTI is off around 1.4% after falling 2.2% yesterday. Nevertheless, it is up about 7% this week. US natgas is softer, trying to snap a four-day advance. It was up almost 11% this week coming into today. Europe's natgas benchmark is more than 2% lower to pare this week's gain to about 6.5%. Iron ore rose 3.5% to recoup this week's loss. Copper is a little firmer to be flat on the week. The price of wheat is falling for a fourth session following a 5.2% rally to start the week. It is up less about 1% for the week. It had fallen around 12.3% in the previous two weeks. Asia Pacific Tokyo's CPI accelerated this month as the weaker yen and higher commodity prices fed through. The 1.3% headline increase was slightly stronger than expected. Excluding fresh food, the core measure edged up to 0.8% from 0.5%. Electricity, gas, and imported food lifted the core measure. Excluding fresh food and energy, the deflationary pressures slackened to -0.4% from -0.6%. Meanwhile, the 10-year JGB yield approached the 0.25% cap imposed by yield-curve control and a more active defense may be necessary next week. At the same time, Prime Minister Kishida has reportedly instructed the cabinet to put together a supplemental budget next week. China's Security Regulatory Commission is still apparently negotiating with the America's Public Company Accounting Oversight Board. Earlier this week, Chinese accounts made it seem that a deal was imminent that would allow mainland-based companies to remain listed on US exchanges. The issue are US laws that require audit reports to be made to authorities. Chinese authorities appear to make some concessions but wanted to withhold some "sensitive" data. If the US rules are flaunted for three years, the violator faces de-listing. That could begin in 2024. Reports suggest China has sent Russia 30k tons of alumina following Australia's ban that provided Russia's Rusal with 40% of its alumina supply. Another 30k tons are expected to follow quickly. The US and Europe have cautioned China against material support for Russia. However, officials say there is so far no evidence of Chinese assistance. The alumina deal is being cast as a commercial transaction rather than state sponsored. Meanwhile, China's lockdown this week of Tangshan (steel producing region) and Shandong (oil refineries) have knock-on effects that are disrupting the world's second-largest economy, with potential to further disrupt supply chains. The dollar is falling for the first time in six sessions. If the 0.66% pullback is sustained, it would be the largest loss since last November. Even with the decline, the greenback is up nearly 2% against the yen this week. The profit-taking began after the dollar had risen to almost JPY122.50 in North America yesterday. The pullback brings the dollar back to where it was in Tokyo on Thursday. Initial resistance is now seen near JPY122.00. The momentum readings are stretched, but the move does not seem complete. The Australian dollar set a new high for the year near $0.7535 before succumbing to some light profit-taking. It found support a little below $0.7500. Even with the pullback, it is the strongest of the major currencies this week, gaining almost 1.25%. The intraday technical indicators favor a recovery in North America. The US dollar slipped against the Chinese yuan for the second session but is still poised to extend its gain for the fourth consecutive week. The Chinese 10-year premium over the US narrowed by about 20 bp this week to 45 bp. The PBOC set the dollar's reference rate at CNY6.3739, a little above projections for...

Overview: With the US warning about a "vertical escalation" by a stymied Moscow and the EU cautioning that Beijing may send semiconductors and other tech hardware to Russia, it is little wonder that risk appetites are being curtailed ahead of the weekend. Japan eked out a small gain, most of the major bourses in the Asia Pacific region were lower. Of note the Hang Seng's 2.4% fall left it virtually flat on the week. Europe's Stoxx 600 is flat after posting two consecutive losing sessions. US futures are narrowly mixed. Benchmark yields are a couple of basis points lower, putting the US 10-year around 2.36%. European yields are 2-4 bp softer. Following a firmer than expected Tokyo March CPI, the 10-year JGB yield rose to a new high, just shy of 0.24%. In the foreign exchange market, the cautious risk stance is evident with the yen and Swiss franc showing modest strength. An exception to the risk-off is the relative strength of emerging market currencies. The JP Morgan Emerging Market Currency Index is up for the fourth sessions to put the finishing touches on the second weekly advance. Turning to commodities, gold is consolidating above $1950 and is up about 2% this week. May WTI is off around 1.4% after falling 2.2% yesterday. Nevertheless, it is up about 7% this week. US natgas is softer, trying to snap a four-day advance. It was up almost 11% this week coming into today. Europe's natgas benchmark is more than 2% lower to pare this week's gain to about 6.5%. Iron ore rose 3.5% to recoup this week's loss. Copper is a little firmer to be flat on the week. The price of wheat is falling for a fourth session following a 5.2% rally to start the week. It is up less about 1% for the week. It had fallen around 12.3% in the previous two weeks. Asia Pacific Tokyo's CPI accelerated this month as the weaker yen and higher commodity prices fed through. The 1.3% headline increase was slightly stronger than expected. Excluding fresh food, the core measure edged up to 0.8% from 0.5%. Electricity, gas, and imported food lifted the core measure. Excluding fresh food and energy, the deflationary pressures slackened to -0.4% from -0.6%. Meanwhile, the 10-year JGB yield approached the 0.25% cap imposed by yield-curve control and a more active defense may be necessary next week. At the same time, Prime Minister Kishida has reportedly instructed the cabinet to put together a supplemental budget next week. China's Security Regulatory Commission is still apparently negotiating with the America's Public Company Accounting Oversight Board. Earlier this week, Chinese accounts made it seem that a deal was imminent that would allow mainland-based companies to remain listed on US exchanges. The issue are US laws that require audit reports to be made to authorities. Chinese authorities appear to make some concessions but wanted to withhold some "sensitive" data. If the US rules are flaunted for three years, the violator faces de-listing. That could begin in 2024. Reports suggest China has sent Russia 30k tons of alumina following Australia's ban that provided Russia's Rusal with 40% of its alumina supply. Another 30k tons are expected to follow quickly. The US and Europe have cautioned China against material support for Russia. However, officials say there is so far no evidence of Chinese assistance. The alumina deal is being cast as a commercial transaction rather than state sponsored. Meanwhile, China's lockdown this week of Tangshan (steel producing region) and Shandong (oil refineries) have knock-on effects that are disrupting the world's second-largest economy, with potential to further disrupt supply chains. The dollar is falling for the first time in six sessions. If the 0.66% pullback is sustained, it would be the largest loss since last November. Even with the decline, the greenback is up nearly 2% against the yen this week. The profit-taking began after the dollar had risen to almost JPY122.50 in North America yesterday. The pullback brings the dollar back to where it was in Tokyo on Thursday. Initial resistance is now seen near JPY122.00. The momentum readings are stretched, but the move does not seem complete. The Australian dollar set a new high for the year near $0.7535 before succumbing to some light profit-taking. It found support a little below $0.7500. Even with the pullback, it is the strongest of the major currencies this week, gaining almost 1.25%. The intraday technical indicators favor a recovery in North America. The US dollar slipped against the Chinese yuan for the second session but is still poised to extend its gain for the fourth consecutive week. The Chinese 10-year premium over the US narrowed by about 20 bp this week to 45 bp. The PBOC set the dollar's reference rate at CNY6.3739, a little above projections for...

The Fed keeps warning it will need to roll out the big guns in its battle against inflation. Traders have priced in faster rate increases to reflect this shift but the dollar hasn’t really benefited. Instead, it is the yen that has suffered. The coming week includes inflation stats from Europe and employment numbers from America, which combined could decide what’s next for euro/dollar. 

United States: From factories to construction sites, supply shortages slow activity Economic reports this week for both manufacturing and homebuilding shared two main themes: disappointing headline numbers, but plenty of backlogs for future work. Whether it is new homes or durable goods, the biggest clog in the production pipeline continues to be supply shortages, and it is increasingly evident that no part of the economy is spared from their pernicious effects. Next week: Personal Income & Spending (Thurs), Employment (Fri), ISM Manufacturing (Fri). International: U.K inflation soars to a 30-year high In the context of elevated global price pressures, inflation in the United Kingdom is showing no signs of slowing down anytime soon. The February CPI surprised to the upside, rising 6.2% year-over-year, as higher prices for energy and commodities have started to reverberate throughout the economy to affect prices more broadly. Next week: China PMIs (Thurs), Japan Tankan Survey (Fri), Eurozone CPI (Fri). Interest rate watch: Interest rate volatility near a decade-high The roller coaster ride for U.S. interest rates continued this week. By at least one measure, interest rate volatility is currently well above its average over the past decade and is nearing the highs reached during the peak of the COVID crisis in March 2020. Credit market insights: Looking back at 2021 with the distributional financial accounts The Federal Reserve's Distributional Financial Accounts was released for the fourth quarter of 2021, giving us more information on the state of households across diverse segments of the American population. Across the socioeconomic spectrum, household balance sheets have been bolstered since the onset of the pandemic, with growth particularly concentrated at the lowest and highest ends of household wealth. Topic of the week: Prices keep pumping up at the pump Gas prices reached record highs during the first weeks of March, raising concerns about the potential implications for consumer spending. It's a predictable pivot, as a sudden price increase in a product that most households cannot do without has historically been associated with wilting consumer sentiment. Download The Full Weekly Economic & Financial Commentary

GBP/USD witnessed selling for the second straight day on Thursday amid modest USD strength. The Fed’s hawkish outlook, elevated US bond yields continued acting as a tailwind for the buck. The risk-on impulse capped the USD and assisted the pair to find support ahead of mid-1.3100s. The GBP/USD pair extended the previous day's rejection slide from the 1.3300 mark, or a two-and-half-week high, and witnessed some selling for the second successive day on Thursday. The intraday downfall dragged spot prices to a two-day low and was sponsored by modest US dollar strength. A slew of influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to bring down unacceptably high inflation. The speculations were further fueled by surging crude oil prices, which should continue to put upward pressure on the already elevated consumer prices. This, in turn, pushed the yield on the benchmark 10-year US government bond back closer to the  22-month high touched earlier this week and underpinned the greenback. Meanwhile, tensions in Ukraine have shown no signs of de-escalating. This, along with the lack of progress in the Russia-Ukraine peace negotiations, further benefitted the safe-haven buck. On the other hand, the British pound was pressured by a dovish assessment of the Bank of England's view around the need for future rate hikes. Bulls failed to gain any respite from an unexpected rise in the UK Services PMI, which was offset by a larger drop in the gauge for the manufacturing sector. From the US, Durable Goods Orders fell short of market expectations, while the Weekly Initial Jobless Claims recorded a larger than anticipated fall during the week ended March 18. The mixed economic data did little to impress intraday traders or provide any meaningful impetus to the major. That said, the risk-on impulse in the financial markets capped gains for the greenback and assisted the pair to find some support just ahead of mid-1.3100s. Nevertheless, the pair finally settled with modest intraday losses, though managed to gain strong positive traction during the Asian session on Friday. It, however, remains to be seen if bulls are able to capitalize on the move amid the risk of a further escalation in tensions between Russia and the West. In fact, the Biden administration rolled out more sanctions against Russia, targeting individuals and entities in response to its invasion of Ukraine. Adding to this, US President Joe Biden called for Russia to be expelled from the Group of Twenty forum of the world’s largest economies. There isn't any major market-moving economic data due for release from the UK, leaving the pair at the mercy of the USD price dynamics. Meanwhile, the US economic docket features the release of revised Michigan Consumer Sentiment Index and Pending Home Sales data. The focus, however, will remain on geopolitical developments, which will influence the broader market risk sentiment. Apart from this, the US bond yields will drive demand for the USD and produce some meaningful trading opportunities around the pair on the last day of the week. Technical outlook From a technical perspective, the overnight slide stalled near support marked by the lower end of an ascending channel extending from the YTD low touched earlier this month. Given the recent sharp decline witnessed over the past one month or so, the said channel constitutes the formation of a bearish flag pattern on short-term charts. Traders, however, are likely to wait for sustained breakthrough the channel support, currently around mid-1.3100s, before positioning for any further depreciating move. The pair would then turn vulnerable to accelerate the slide towards the 1.3100 round figure mark. Some follow-through selling will set the stage for the resumption of the prior well-established bearish trend and drag the pair back towards the key 1.3000 psychological mark. On the flip side, any subsequent move up is likely to confront stiff resistance near the 1.3255-1.3260 region. Sustained strength beyond could allow bulls to make a fresh attempt to conquer the 1.3300 round-figure mark and lift the pair further towards the next relevant hurdle near the 1.3320-1.3325 region.