Overnight Headlines NZ Dollar Outperforms as IMF Report Feeds Rate Hike Expectations British Pound Consolidates NY-Session Gains Ahead of Inflation Data Critical Levels CCY SUPPORT RESISTANCE EURUSD 1.4157 1.4258 GBPUSD 1.6227 1.6351 The Euro and British Pound were little changed in overnight trade. The single currency consolidated just above the 1.42 to the US Dollar while Sterling oscillated around 1.63 to the greenback. We remain short NZDUSD. Asia Session: What Happened GMT CCY EVENT ACT EXP PREV 4:00 JPY Tokyo Condominium Sales (YoY) (FEB) 24.9% - -13.5% 4:30 JPY All Industry Activity Index (MoM) (JAN) 2.9% 2.8% -0.3% (R-) 7:00 JPY Convenience Store Sales (YoY) 6.5% - 5.1% The New Zealand Dollar outperformed in otherwise quiet Asian trade, rising as much as 0.5 percent on average against its major counterparts. The advance followed a report from the International Monetary Fund that predicted the island nation's economy will add a whopping 4 percent in 2012 amid rebuilding efforts following the pair earthquakes that hit Christchurch in September 2010 and February of this year. The economy is expected to grow 1 percent in 2011. The IMF estimated the cost of damage from the quakes at NZ$15 billion, or 7.5 percent of overall gross domestic product. The lender added that "monetary policy will need to be tightened when it becomes clear that the recovery is under way," cautioning the RBNZ to "guard against medium-term inflation expectations becoming anchored at too high a level." Euro Session: What to Expect GMT CCY EVENT EXP PREV IMPACT 7:00 CHF Trade Balance (CHF) (FEB) - 1.96B Low 7:00 CHF Exports (MoM) (FEB) - 4.3% Low 7:00 CHF Imports (MoM) (FEB) - 0.3% Low 9:30 GBP Consumer Price Index (MoM) (FEB) 0.6% 0.1% High 9:30 GBP Consumer Price Index (YoY) (FEB) 4.2% 4.0% High 9:30 GBP Core Consumer Price Index (YoY) (FEB) 3.1% 3.0% Medium 9:30 GBP Retail Price Index (FEB) 230.6 229 Medium 9:30 GBP Retail Price Index (MoM) (FEB) 0.7% 0.3% Medium 9:30 GBP Retail Price Index (YoY) (FEB) 5.2% 5.1% Medium 9:30 GBP Retail Price Index ex Mort Int. Payments (YoY) (FEB) 5.2% 5.1% Low 9:30 GBP Public Finances (PSNCR) (£) (FEB) -4.2B -14.4B Low 9:30 GBP Public Sector Net Borrowing (£) (FEB) 7.6B -5.3B Low 9:30 GBP PSNB ex Interventions (£) (FEB) 7.2B -3.7B Low 11:00 GBP CBI Trends Total Orders (MAR) -6 -8 Low UK Consumer Price Index figures headline the calendar in European hours, with expectations calling for the inflation rate to rise to 4.2 percent – a 28-month high – in the year through February. Although the British Pound seems to be looking to risk sentiment as the top driver of price action, the reading may rekindle sagging interest rate hike expectations and offer a near-term boost to the UK unit. With that in mind, the Bank of England's latest inflation report made it clear that policymakers were expecting headline price growth to "pick up to between 4 and 5 percent in the near term," which they chalked up to temporary factors including the increase in the VAT – a consumption tax – as well as higher energy and import prices. The bank added that "inflation is likelyto fall back as those [temporary] effects wane," repeating largely the same familiar mantra it employed while holding rates at record lows through all of last year. On balance, this suggests that an increase in CPI in and of itself will be insufficient to truly entrench robust rate hike expectations. For that, markets will look ahead to the publication of minutes from the March sit-down of the rate-setting MPC, with all eyes on policymakers' voting pattern to see if the hawks managed to lure a fourth BOE official to their side of the spectrum. This would put them just one vote shy of a majority, making a rate increase in the near term a very real possibility. As it stands, futures markets are pricing in the first 0.25 percent hike in benchmark borrowing costs in September. On the sentiment front, stock index futures tracking key US and European benchmarks are ticking cautiously lower in late Asian trade, hinting risk appetite may be starting to cool after yesterday's global rally took the MSCI World Stock Index to its largest daily gain in seven weeks. On balance, this opens the door for a recovery in the US Dollar against the spectrum of sentiment-sensitive currencies.

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