Canadian dollar strengthens in early US session after release of stronger than expected GDP data. March GDP grew 0.6% mom, above expectation of 0.5% and stronger than Feb's 0.3%. Q1 GDP annualized also rose more than expected by 6.%. IPPI rose 0.3% mom while RMPI rose 1.7% in April, both are above expectations. Canadian dollar is given a lift by the data, ahead of tomorrow's BoC rate decision where markets expect BoC to be the first G7 central bank to start tightening.

ECB President Trichet hit back at critics that questioned the bank's independence over its new program to buy governments and insisted that they're not printing money. Trichet emphasized that the banks has not gone beyond our goal of re-establishing a more correct transmission mechanism of our monetary policy. Trichet also urged governments to implement rigorously the measures needed to ensure fiscal sustainability. Bundesbank President weber said that the bond purchase program has substantial stability risks and urged a quick end to the program. Bank of Italy Governor Draghi said these measures will have to be discontinued as quickly as possible, as soon as the markets spontaneously resume trading of the securities of the countries involved.

Fed Chairman Bernanke said that Fed will manage its exit from accommodative policies in medium term. But the timing of the exit is likely to differ across countries, as economic conditions vary. Bernanke didn't elaborate on the outlook for the US economy or monetary policy. Chicago Fed Evans said the European situation adds uncertainty to the economic outlook and he wouldn't be surprised if the Fed's policy of keeping rates low gets extended just a little bit. Philly Fed Plosser said how the crisis in Europe ends up affecting the economy will dictate how we will respond.

On the data front, Japan Manufacturing PMI rose to 54.7 in May. Industrial production rose 1.3% mom, 25.9% yoy in April. Housing starts rose 0.6% yoy in April. Eurozone M3 money supply dropped less than expected by -0.1% you in May. Economic confidence dropped to 98.4 in May. Services confidence also dropped to 3. But consumer confidence was steady at -18 while industrial confidence improved to -6.

Looking ahead, The RBA will most likely keep the cash unchanged at 4.5% after taking it up for 6 times since October 2009 from an unprecedentedly low level at 3%. At the accompanying statement after May's meeting, RBA governor Glens Stevens hinted a pause in June as he stated that the rate hikes represent 'a significant adjustment from the very expansionary settings reached a year ago' and have brought interest rates for most borrowers to 'around average levels'. Furthermore, recent macroeconomic developments, including sovereign crisis in the Eurozone and its impacts on global economic outlook, heightened sense of risk aversion and moderation in domestic economic data in Australia, have also suggested the central bank to be on hold. More in RBA To Pause In June With Traders Pricing In Chances Of Rate Cut

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.0473; (P) 1.0515; (R1) 1.0588;

USD/CAD's fall from 1.0851 is still in progress and further fall is expected towards 61.8% retracement of 1.0109 to 1.0851 at 1.0392 and below. But at this point, we'd still expect strong support above near term rising trend line (now at 1.0250) and bring rebound. On the upside, above 1.0561 minor resistance will indicate that pull back from 1.0851 is over and flip intraday bias back to the upside for retesting this high first.

In the bigger picture, last week's break of 1.0779 resistance confirms that a medium term bottom is formed at 0.9929 already, with bullish convergence condition in weekly MACD. We'd stay bullish in USD/CAD and expect the rebound from 0.9929 to target 38.2% retracement of 1.3063 to 0.9929 at 1.1126 first, with prospect of extending further to 61.8% retracement at 1.1866 and above. On the downside, break of 1.0109 support is needed to invalidate this view. Otherwise, we'll stay bullish.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 23:15 JPY Nomura/JMMA Manufacturing PMI May 54.7 -- 53.5 53.8 23:50 JPY Industrial Production M/M Apr P 1.30% 2.60% 0.30% 1.20% 23:50 JPY Industrial Production Y/Y Apr P 25.90% 27.40% 31.80% 01:30 AUD Current Account Balance (AUD) Q1 -16.6B -16.4B -17.5B -18.5B 03:00 NZD NBNZ Business Confidence May 48.2 -- 49.5 05:00 JPY Housing Starts Y/Y Apr 0.60% 6.60% -2.40% 08:00 EUR Eurozone M3 Y/Y Apr -0.10% -0.30% -0.10% 09:00 EUR Eurozone CPI Estimate Y/Y May 1.60% 1.70% 1.50% 09:00 EUR Eurozone Economic Confidence May 98.4 100.6 100.6 09:00 EUR Eurozone Consumer Confidence May -18 -18 -18 09:00 EUR Eurozone Industrial Confidence May -6 -7 -7 09:00 EUR Eurozone Services Confidence May 3 6 5 12:30 CAD Quarterly GDP Annualized Q1 6.10% 5.80% 5.00% 12:30 CAD GDP M/M Mar 0.60% 0.50% 0.30% 12:30 CAD Industrial Product Price M/M Apr 0.30% -0.30% -0.40% 12:30 CAD Raw Materials Price Index M/M Apr 1.70% 1.00% 0.80%