Key Highlights

• President Trump warns he will “blow up” South Pars gas field in Iran if strikes against Qatari energy infrastructure continue.
• European gas futures surge 35% amid fears over LNG supplies.
• Swiss, Swedish, Japanese and Taiwanese central banks all leave rates unchanged.

Chart of the Day

EURUSD and GBPUSD seeking to reverse recent outflows

^{Source: BNY}

With mildly hawkish decisions expected from the BoE and ECB today, flows in EUR and GBP, especially on their dollar legs, are expected to continue a recent recovery after a heavy period of risk aversion-based sales at the beginning of the conflict.

EURUSD remains the biggest drag on EUR’s performance, though we note that over the past two sessions this week, both EURGBP and EURUSD have shifted back into net purchase. That means the severe outflow in the EUR aggregate points to heavy cross-selling of EUR this week. Given the plethora of central bank decisions, there is potentially a case for the EUR to be treated as a funder, but that does not align with our view on where the ECB could stand.

Meanwhile, GBPUSD has also managed to recover this week, but net selling persists. Even with the improvement, flow scores are far too small to dampen the net selling seen throughout the past few weeks. If the Fed’s re-pricing has run its course, then the marginal driver of interest will be from the MPC, even if capacity for major changes is relatively light (e.g. a shift by one of the doves toward a “hold” stance).

Overall, given the lack of strong reactions to any of the key central bank decisions so far today, we do not expect a material build-up in GBP or EUR long positions until the risk environment settles down.

What's Changed?

The energy shock continues to drive markets, with global equities lower, bonds lower and USD higher. The focus on natural gas is shifting the pressure to the ECB and BoE decisions next. The uncertainty of the war leaves central bankers wanting more time and keeping policy plans on hold, with wider bands for all forecasts. This started with the BoC and Fed yesterday, with the baton passing to the SNB, Riksbank and BoJ today. Demand destruction is being balanced against inflation, with rotations in equity sectors and bonds insufficient to cover the extended volatility. The large moves in oil and gas are showing up in other markets today, with the focus on value at risk shocks tracking energy price shocks.

• Oil and natural gas: The benchmark for watching oil is shifting from Brent or WTI to Omani crude, which is up over 8% but hit a high of $168.60 today. Not all oil is equal, and fragmentation will add to volatility. Following the Iranian attack on the Qatari LNG refinery at Ras Laffan, further attacks on oil and natural gas infrastructure in the GCC continue to drive prices higher. A Saudi Aramco refinery in Yanbu on the Red Sea was attacked, marking a new escalation in the war. Kuwait has reported an attack on its Mina Abdullah oil refinery. The next focus is on U.S. troops and a possible new phase to the conflict. EU natural gas was up 30%, diesel up 10% and gasoline up 4.5%.
• Central bank uncertainty: The uncertainty over the energy price shock is showing up in central bank statements and a clear slowdown in their planned action plans ahead. The BoJ keeping rates on hold wasn’t a surprise, but the rise in JGB yields shows the cost. BoJ Governor Kazuo Ueda still sees some distance before the price target is met, with uncertainty linked to the conflict in the Middle East and energy. Brazil’s Copom made a 25bp cut, as expected, but cited war-related uncertainty as it embarked on an easing cycle. Following China’s “Two Sessions,” the PBoC has vowed to keep stock, bond and FX markets stable. It says it will coordinate with fiscal policies and implement moderately loose policy. SAFE will prepare for external shocks and monitor cross-border flows more closely.
• Equity volatility: Chips remain in demand, as Micron’s Q2 earnings show the company beating EPS expectations and nearly tripling revenues, linked to AI. Against that, we see ongoing credit worries ranging from S&P lowering its ratings for Cliffwater to Stone Ridge limiting redemptions on its consumer loan fund. What has surprised many macro market watchers has been how the markets have balanced volatility since the war began. The VIX closed up 2.72 at 25.1 points yesterday, with the focus on option expiries and the curve ending its backwardation (down 5 points since the start of the week). This move seems likely to be reversed today, adding to concerns about wider trading bands, liquidity and hedging into quarter-end.

Bottom line: The timing of market extremes has always marked the dividing line between trading and investing. Calling a top or a bottom never generates as much return as following a calmer trend. The price action in oil and natural gas today in response to the escalation of the conflict has surprised traders and investors across asset classes, leading to questions about where moves become unsustainable. The key question is whether this will translate into a broader move across markets. The VIX, MOVE and JPY volatility will be key barometers today. The moves seen since the war started have been tame enough to cast doubt about the economic impacts beyond temporary inflation spikes. Today starts a new phase in the timing, where financial conditions and risk parity programs matter. Whether the ECB or BoE or other officials can de-escalate this will be the work of the day. 

What You Need to Know

European gas prices surged sharply overnight after Iranian missile strikes hit Qatar’s Ras Laffan LNG facility, the world’s largest export hub, intensifying fears of a prolonged global supply disruption. Benchmark futures jumped as much as 35%, with Dutch front-month prices trading 22% higher at €66.83/MWh. This left prices more than double pre-war levels. The strike caused extensive damage and fires at a site responsible for roughly one-fifth of global LNG supply, with outages now expected to persist. Additional disruption from shutdowns at Abu Dhabi’s Habshan facilities compounded concerns, as markets are increasingly pricing in sustained tightness in LNG availability. President Trump has warned of large-scale retaliation against Iran if Qatar’s LNG facilities are targeted again. HH Natural Gas +4.633% to 3.207, Dutch TTF Natural Gas +23.496% to 67.505.

The Bank of Japan’s Monetary Policy Meeting has voted 8-1 to keep the uncollateralized overnight call rate around 0.75%. Japan’s economy has seen a moderate recovery with resilient private consumption and moderate business investment, despite flat exports and industrial production. Inflation (CPI excluding fresh food) had risen 2% y/y due to food price increases but recently eased to around 2%, influenced by government measures on energy costs. The bank is projecting moderate growth and a gradual rise in inflation, targeting price stability at 2% while monitoring risks from Middle East tensions, crude oil prices and global economic policies. The BoJ maintained a hawkish outlook, commenting that it would “continue to raise the policy interest rate and adjust the degree of monetary accommodation,” if the outlook for economic activity and prices is realized. Nikkei -3.38% to 53373, USDJPY -0.12% to 159.2, 10y JGB +5.8bp to 2.277%.

The Swiss National Bank has left its policy rate unchanged at 0%, while signaling increased willingness to intervene in FX markets to counter excessive Swiss franc appreciation amid the Middle East tensions. Inflation rose slightly to 0.1% in February from 0.0% in November, with short-term forecasts revised higher due to energy prices, while medium-term pressures remain broadly unchanged. The SNB is projecting average inflation of 0.5% in 2026 and 2027 and 0.6% in 2028, within its price stability range. GDP is expected to grow by around 1% in 2026 and 1.5% in 2027, although risks to growth and inflation remain elevated due to geopolitical uncertainty and energy market developments. SMI -1.62% to 12559, EURCHF -0.071% to 0.90772, 10y Swiss GB +2bp to 0.383%.

Sweden’s Riksbank left its policy rate unchanged at 1.75% at its March meeting, as policymakers assessed heightened uncertainty stemming from the Middle East conflict, which has driven energy prices higher, strengthened the U.S. dollar against the krona and increased financial market volatility. It noted that underlying inflation has recently surprised to the downside, although higher energy costs are expected to lift CPIF inflation in the near term and weigh modestly on growth. The baseline view assumes only limited and temporary effects, with current policy deemed appropriate to support the recovery and guide inflation back toward target, while stressing readiness to adjust rates in either direction depending on how inflation and demand evolve. OMX -2.42% to 2942, EURSEK -0.113% to 10.7787, 10y Swedish GB +2.6bp to 2.825%.

Taiwan’s central bank has kept its policy rates unchanged, with the discount rate at 2%. This reflects expectations of moderate inflation and solid economic growth amid heightened global uncertainty. The bank highlighted resilient domestic conditions, supported by AI-driven exports, investment and improving consumption, and raised its 2026 GDP growth forecast to 7.28%. Inflation remains contained, with CPI averaging 1.23% y/y in January-February, though forecasts were revised up to 1.80% due to rising energy prices. The bank also adjusted selective credit controls, raising the loan-to-value cap on second-home mortgages to 60%, citing cooling property markets and improved credit allocation, while signaling vigilance on FX stability and geopolitical risks. TAIEX -1.92% to 33690, USDTWD +0.387% to 31.966, 10y TGB +0.1bp to 1.415%.

What We're Watching

Bank of England is expected to keep rates unchanged at 3.75%.

European Central Bank is expected to keep rates unchanged at 2.0%.

U.S. weekly initial jobless claims forecast at 215k vs. 213k the week prior.

U.S. March Philadelphia Fed business outlook is expected to drop to 8.5 vs. 16.3 in February.

U.S. January new home sales forecast at 725k vs. 745k in December 2025.

U.S. January final wholesale inventories expected to be unrevised from initial estimate at 0.2% m/m.

U.S. Treasury sells $90bn in 4-week bills, $85bn in 8-week bills and $19bn in a 10y TIPS reopening.

What iFlow is Showing Us

Mood: Risk aversion persists, with continued equity selling alongside demand for bonds. iFlow Mood has deteriorated further to -0.145.

FX: Flows remain mixed and light in G10, with greater differentiation across EM. LatAm FX continued to attract inflows, while PLN, CNY, and ZAR also saw solid buying. This contrasts with notable outflows from TRY, IDR and INR.

FI: Broad-based demand for G10 sovereign bonds continued. Flows in LatAm were relatively muted, while outflows dominated elsewhere, particularly in Israel, Türkiye, China and Indonesia.

Equities: Selling pressure in G10 equities was led by the U.S. and Europe. In EM, Colombia and India recorded significant outflows, while Brazil, Mexico, Poland and Thailand saw strong buying. Within DM Americas, consumer discretionary and financials were the most sold sectors, while the materials sector attracted inflows.

Quotes of the Day

“You don’t have to swing hard to hit a home run. If you got the timing, it’ll go.” – Yogi Berra

“Execution is something, but timing is everything.” – Todd Stocker

Economic Details

EU wages and labor costs continued to rise in the fourth quarter of 2025, with hourly labor costs increasing by 3.3% y/y in the euro area and 3.7% y/y across the EU. This growth was driven by both wage and non-wage components, with wages rising more moderately (3.0% in the euro area, 3.4% in the EU) and non-wage costs up 4.4% and 4.5%, respectively. By sector, labor cost growth was broad-based, with construction and services leading, while industry lagged somewhat. In the EU, construction saw the strongest increase at 4.5%, followed by services at 3.9% and industry at 3.1%. By activity, real estate, professional services and education recorded the largest wage increases, while energy and manufacturing saw the weakest gains. Overall, the data suggest persistent cost pressures, particularly from non-wage components and service-oriented sectors. Euro Stoxx 50 -2.13% to 5615, EURUSD -0.027% to 1.1449, BBG AGG Euro Government High Grade EUR -2.6bp to 3.149%.

The Netherlands’ unemployment rate in February was 4.1%, with 416,000 people out of work; the number increased by an average of 3,000 per month over the past three months, while employment rose by a modest 1,000/month. The labor force totaled 10.3 million, with 9.8 million people employed, while 3.2 million remained outside the labor force, down by 3,000 per month. Unemployment benefit recipients stood at 205,500, edging down 0.1% m/m but remaining above 200,000, with inflows and outflows broadly balanced. Labor market flows showed 146,000 unemployed people finding work versus 121,000 becoming unemployed, while 136,000 entered the labor force without jobs, contributing to the slight upward trend in unemployment. AEX -1.86% to 981, EURUSD -0.027% to 1.1449, 10y NGB +3.8bp to 3.126%.

The U.K. labor market recorded an unemployment rate of 5.2% and employment rate of 75.1% in November to January, rising both q/q and y/y, while inactivity fell to 20.7%. Payrolled employees decreased by 0.3% y/y in January, with a further provisional fall of 0.2% y/y in February to 30.3 million, though m/m gains were recorded. Vacancies decreased by 0.8% to 721,000, remaining broadly flat overall. Workforce jobs rose 0.1% q/q but fell 0.7% y/y, driven by a 5.6% reduction in self-employment. Nominal earnings growth was 3.8% for regular pay and 3.9% for total pay, with real pay growth modest at 0.4% and 0.5%, respectively. FTSE 100 -1.77% to 10123, GBPUSD -0.053% to 1.325, 10y gilt +9bp to 4.828%.

Switzerland’s recorded a 2.7% m/m fall in exports to CHF 22.2bn in February, with imports down 8.3% m/m to CHF 17.8bn. This extends the recent volatility and marks a fourth consecutive drop in imports. The trade surplus widened to CHF 4.4bn. Export weakness was broad-based, led by chemicals and pharmaceuticals (-3.1%) and machinery (-2.6%), although watch exports rose 1.3% and shipments to the U.S. increased sharply. Imports were driven down by a 31.9% plunge in pharmaceutical products, particularly medicinal goods, with declines across all major regions. By region, exports to Asia fell 12.0% and to Europe 3.5%, while North America saw a rise of 19.4%. SMI -1.62% to 12559, EURCHF -0.071% to 0.90772, 10y Swiss GB +2bp to 0.383%.

Sweden’s Origo/Riksbank March inflation expectations survey showed CPI expectations at 1.5% for year 1, 2.2% for year 2 and 2.0% for year 5, while CPIF expectations stood at 1.6%, 2.1% and 2.0%, respectively, broadly stable versus prior readings. GDP growth expectations were 2.2% for both year 1 and year 2, easing slightly to 2.1% for year 5. Wage growth expectations were 3.1% for year 1, 3.0% for year 2 and 2.8% for year 5. Policy rate expectations were 1.8% at three months, rising to 1.9% at 12 months, 2.1% at 24 months and 2.3% at 60 months, indicating a gradual tightening path. OMX -2.42% to 2942, EURSEK -0.113% to 10.7787, 10y Swedish GB +2.6bp to 2.825%.

Norway’s Q1 Regional Network survey indicated broadly stable growth prospects, with firms expecting output growth of 0.3% in Q1 and 0.4% in Q2, supported by defense spending, energy investment and household demand, while construction weakness and the completion of oil-related projects are weighing on activity. Capacity utilization declined slightly, with 32% of firms at full capacity, and labor shortages eased, while employment growth remains modest. Wage growth expectations were revised to 4.2% for 2026 and 3.9% for 2027. Investment growth is projected at 3.6% in 2026, led by services and industry. Regional indicators were positive overall, with strongest conditions in the southwest and weakest in the central region.

Poland’s average wage growth for February was 6.1% y/y and 1.5% m/m, with the average gross monthly wage at PLN 9,135.69. Meanwhile employment dropped by 0.8% y/y and was flat m/m at 6.40 million. Over January-February, wages increased by 5.9% y/y and employment fell 0.8% y/y. The m/m wage increase was driven by higher bonus and premium payments, including annual and long-service awards, alongside pay rises. Employment trends have remained broadly stable in recent months, while the rise in the minimum wage to PLN 4,806 in January has also supported overall wage growth. WIG -1.19% to 121245, EURPLN +0.005% to 4.279, 10y PGB +12.3bp to 5.773%.

Polish construction output fell 13.7% y/y in February while rising 6.4% m/m. Seasonally adjusted output was down 12.4% y/y and 3.8% m/m, remaining 37.8% below the 2021 monthly average. Declines were broad-based, led by building construction (-16.7% y/y), specialized works (-12.2%) and civil engineering (-11.7%). Construction prices increased by 3.8% y/y and were flat m/m, with a 0.2% m/m rise in civil engineering and flat readings elsewhere. Industrial producer prices fell 2.3% y/y but rose 0.1% m/m, marking a modest rebound after prior declines. Price pressures remained moderate overall, with construction costs rising while industrial prices continued to contract on a y/y basis.

Japanese machinery orders for January 2026 fell by 5.5% m/m (excluding shipbuilding and power), after two months of growth. The drop was mainly due to the absence of large projects from the previous month. However, the three-month moving average showed a slight 0.1% m/m decrease, indicating a modest slowdown rather than a sharp contraction. On a y/y basis, Japanese machinery orders were up 13.7% y/y from 16.8% y/y in December 2025. The Cabinet Office maintained its assessment that machinery orders are showing signs of recovery. Elsewhere, foreign investors turned net sellers of Japanese equities for the first time in December 2025, offloading ¥1.773tn in the week of March 13. This was the largest weekly outflow since September 12, 2025. Japanese investors accelerated their foreign equity purchases, with ¥951bn in net buying – the strongest since May 2, 2025 – bringing YTD purchases to a record ¥2.577tn. Nikkei -3.38% to 53373, USDJPY -0.12% to 159.2, 10y JGB +5.8bp to 2.277%.

Japan’s industrial production in January was +4.3% m/m, with the index at 104.5 points, while y/y growth was 0.7%, with the index at 95.0. Shipments increased by 3.8% m/m and 1.2% y/y, whereas inventories fell by 0.8% m/m and 4.3% y/y. The inventory ratio decreased by 4.6% m/m and 3.7% y/y. Capacity utilization rose by 2.9% m/m to 105.1 index points and increased by 1.0% y/y. Production capacity was flat m/m at 95.2 index points and down 1.4% y/y. Gains were led by transport equipment and general machinery, while falls were recorded in electrical machinery and other manufacturing sectors.

Australia’s seasonally adjusted unemployment rate rose to 4.3% in February 2026 vs. 4.1% in January 2026, with 35,000 more unemployed people. Employment increased by 48.9k, driven by a 79.4k rise in part-time jobs, especially among those aged 65+, and February saw fewer people leaving jobs to retire compared with a year ago. Full-time employment fell by 30k. Hours worked were 0.2% lower, as more workers shifted to part-time instead of full-time hours. The participation rate increased by 0.2 percentage points to 66.9%. The trend unemployment rate decreased slightly to 4.2% from 4.3% in January. ASX -1.2% to 5450, AUDUSD -0.958% to 0.7036, 10y ACGB +7.9bp to 4.976%.

New Zealand’s Q4 2025 GDP came in weaker than expected. GDP rose 0.2% q/q, 1.3% y/y in Q4, slowing from 0.9% q/q, 1.1% y/y in Q3. Key sector drivers included gains in rental, hiring, real estate (up 0.8% q/q), retail trade and accommodation (up 1.3% q/q) and financial services (up 1.5% q/q), while construction declined by 1.4% q/q. Expenditure on GDP increased by 0.1% q/q in Q4, slowing from 0.9% in Q3. Central government final consumption expenditure grew 2.5% q/q, supported by rises for health goods and services purchased for households. Gross fixed capital formation declined by 2.2% q/q, with notable drops in plant, machinery and equipment (-4.4% q/q) and transport equipment (-11.3% q/q), reversing the previous quarter’s gains. Inflation-adjusted household consumption expenditure fell 0.1% q/q, driven by lower spending on recreational and sea passenger services. Import volumes rose 1.0% q/q, while exports edged up 0.1% q/q. NZX 50 -1.98% to 13052, NZDUSD -0.803% to 0.5811, 10y NZGB +8.9bp to 4.684%.

The Philippines’ government debt rose 2.41% m/m to PHP 18.13tn in January, driven by frontloaded domestic and external borrowing to secure favorable financing amid global uncertainty. Domestic debt, accounting for 68% of the total, increased by 1.72% m/m to PHP 12.32tn, reflecting strong issuance of government securities and limited FX exposure. External debt rose 3.89% m/m to PHP 5.81tn, supported by global bond issuance and official development assistance, alongside valuation effects from peso depreciation. The strategy underscores a shift toward pre-emptive financing and maintaining investor confidence, while authorities emphasized that the overall debt level remains sustainable despite rising borrowing needs. PSEi -0.61% to 6019, USDPHP +0.97% to 60.093, 10y PHGB +11.2bp to 6.719%.

Taiwan’s monetary aggregates showed M1B growth of 1.49% m/m and 7.12% y/y in February. Meanwhile M2 rose 0.99% m/m and 5.38% y/y, supported by increased currency demand during the Lunar New Year and stronger bank lending and investment activity. For January-February, average y/y growth rates were 6.35% for M1B and 5.27% for M2. Total loans and investments of monetary financial institutions increased by 1.03% m/m, with annual growth accelerating to 7.37% from 6.71%, driven by stronger credit to both the private and public sectors. Broader financial institution lending growth, including insurers, rose to 5.94% y/y from 5.53%. TAIEX -1.92% to 33690, USDTWD +0.387% to 31.966, 10y TGB +0.1bp to 1.415%.