FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
FX markets were extremely thin during the Asia session and the price action was subdued. Another push lower in USDJPY did not materialise despite fears of this happening, as it often does, due to poor holiday liquidity. The dollar managed to consolidate yesterday’s modest gains but could not rally any further. EURUSD traded 1.4532-1.4578, USDJPY 81.67-81.97. Gold chalked up a new all-time high against the dollar of $1,510.32/oz. Asian equities were mixed, but the S&P500 earlier closed 0.53% ahead. The Philadelphia Fed manufacturing survey fell to 18.5, well below consensus, but the level still indicates solid growth. The leading economic index rose 0.4% and the jobless claims number was above expectations at +403k. There are no economic data releases today, although Bank of England MPC member Posen is due to speak. The title of his talk has not yet been released. The week ahead will be active, with the FOMC decision, Fed Chairman Bernanke’s first press conference, and the advance Q1 GDP estimate all due.
EUR
ECB President Trichet noted he does not see any significant second-round effects at present, and said the ECB had not decided on a series of rate rises. He also noted that a strong dollar is in the interests of the international community. These remarks contributed to some of yesterday’s euro weakness.
The IFO business climate index came down to 110.4 from 111.1. Our European economists note the slight decline provides further confirmation that leading indicators are turning, so growth has probably peaked. Yet it does not provide a reason for the ECB to postpone further rates hikes. The absolute level of the IFO index is still close to all-time highs, and the German economy is still growing strongly, so there is little reason for the ECB to turn more cautious.
GBP
BoE MPC member Weale said the fall in March inflation was surprising but cautioned against over-interpretation as it represents just one month’s data. He said the differences of opinion between MPC policymakers are smaller than generally portrayed. Referring to the upcoming Q1 GDP release, he said he would not be surprised if it came in below +0.7% q/q. Our UK economist thinks that a GDP print that is weaker than +0.7% q/q could make a May rate hike less likely.
CAD
Canadian retail sales advanced by slightly less than expected, rising only +0.4% m/m. Although the ex-autos figure beat expectations, the CAD +retreated against the USD.
TECHNICAL OUTLOOK
GBPUSD 1.6600 resistance.
EURUSD BULLISH Break of 1.4685 would expose 1.4776 ahead of 1.4905. Support lies at 1.4500 ahead of 1.4328.
USDJPY BEARISH Momentum is negative; focus is on 81.55/31 support area, break here would expose 80.69. Resistance is at 82.60.
GBPUSD BULLISH Stalled in front of 1.6600, move above this would expose 1.6672. Initial support is at 1.6387.
USDCHF BEARISH Decline through 0.8852/23 has exposed support at 0.8769 Near-term resistance lies at 0.9012.
AUDUSD BULLISH Focus is on initial resistance at 1.0845, while support at 1.0519 holds.
USDCAD BEARISH Bearish trend is intact; support is at 0.9446/00 area, while resistance is at 0.9600.
EURCHF BEARISH Break of 1.2801 would expose 1.2730; while resistance holds at 1.3000.
EURGBP NEUTRAL 0.8780 and 0.8879 mark the near-term directional triggers.
EURJPY NEUTRAL Move above 120.71 would signal upside potential towards 121.48 and 122.41 next. Support is at 118.27.
SCHEDULE
Please visit GCI’s Economic Calendar for a schedule of market news and events.

