- Reserve Bank of Australia seen on hold after soft CPI data: (AU Q1 CPI QOQ: 0.1% V 0.6% expected; YOY: 2.4% V 3.0% expected) Traders dumped the Aussie dollar after the release, with interbank futures now showing an 8% chance of a RBA hike in May vs. 45% priced in late on Monday. The consensus is that the core measure, which is what the RBA is interested in, is still quite elevated, and they are expected to maintain a hawkish bias in the near term.

- Forex: The USD gained on short covering ahead of tomorrow's consumer confidence data. The GBP/USD dipped below 2.00, and eventually dipped below 1.9972. Some technical analysts say that these levels indicate that a deeper correction is taking place for the GBP/USD, but upside momentum remains intact. Some suggest that the BoE has a history of surprising the market, which may explain why some chatter is going around that the BoE will hike by a more aggressive 50bps next month. The CAD was softer against the USD ahead of the BoC rate decision tomorrow. CAD bulls are hoping that the BoC will hint at some sort of a tightening bias, but others say there is room for disappointment here. The Bank of Canada may not be prepared to present that kind of message at this juncture given the slowdown in the U.S. economy.

- Equities: The Nikkei225 is currently lower by more than 0.75% as traders show caution ahead of upcoming earnings reports out of the U.S. and Japan. Declines on the Nikkei are being led by exporters and chemical companies. Despite stronger than expected results from Texas Instruments, shares of Sony, Tokyo Electron and other technology shares declined as the JPY strengthened. Shares of Nissan rose on its restructuring plans. The ASX 200 index is lower after failing to hold on to CPI-related gains. Declines in shares of ResMed and Bendigo Bank were offset by gains in banking shares, which are sensitive to CPI data. Shares of BHP rose more than 0.45% following its Q3 production update. The Kospi is lower by more than 0.30% on declines in shares of Kookmin Bank. Shares of Posco Steel rose by more than 2.5% on potential M&A speculation. The Hang Seng is lower for the 2nd consecutive session.

- U.S. retailers trade sharply lower after hours ahead of tomorrow's consumer confidence data: U.S. retailer Target (TGT) guided March-April SSS up 3% to 4% vs. their prior guidance of up 4% to 6%. Target added that they see April SSS "much weaker" than prior guidance of -2% to -4%. Some of this weakness might be reflected in consumer confidence data, slated for release ahead of the U.S. session tomorrow.JP Morgan pointed out that "April consumer confidence measures released so far have all deteriorated. Although the Conference Board survey is less sensitive to fuel price swings than other confidence measures, the magnitude of the recent surge in gas prices strongly suggests a pullback."

- Japanese corporate services prices continue to climb higher: (JP MARCH CORPORATE SERVICE PRICE YOY: 0.6% V 0.2% expected, 0.4% prior) According to the BoJ, FY06 Corporate Service Prices rose for the first time y/y since FY97. Significant rises have been seen in office rents and the cost of temporary staff services in the last few months, a sign that rising land prices and a tightening labor market are helping Japan pull out of deflation.

- Commodities: Spot gold is lower by more than 0.40%, holding just above the $691 level, as the USD strengthened in Asia. Crude oil is slightly lower in Asian trading on profit taking after rising sharply during U.S. trading on concerns over Nigeria's presidential elections and Iranian negotiations. Shanghai Copper is higher by more than 2.5% on a decline in global stockpiles.