Markets are still in consolidative mode as dollar extends retreat. Data from US saw housing starts rose more than expected to 672k annualized rate, highest level since October 2008. However building permits dropped to lowest level in six month at 606k annualized rate. PPI unexpectedly dropped -0.1% mom April with yoy rate down to 5.5%. Core PPI rose 0.2% mom, 1.0% yoy. The data provides little inspiration to the financial markets. Major forex pairs are stuck in range. Crude oil recovers mildly to 72 level while gold extends the retreat to 1210. US stocks are set to open mildly higher to extend the strong recovery overnight.

Released earlier, German ZEW investor confidence almost reversed the gain registered in April and dropped sharply from 53.0 to 45.8 in May. Nevertheless it's still much higher than historical average of 27.4. Eurozone ZEW also dropped from 46 to 37.6. ZEW President Wolfgang Franz said that the drop in ZEW may reflect rising uncertainty on the measures aiming at consolidating the public budgets. Another reason is uncertainty with regard to the further development of the euro exchange rate. Also released from Eurozone, CPI rose 0.5% mom, 1.5% yoy in April with core CPI up 0.8% yoy.

Inflation data from UK showed CPI jumped much more than expected by 3.7% yoy in April, highest in 17 months. Nevertheless, BoE Governor King played down the significance of the reading and said that masks substantial slack in the economy. King said is his open letter to Chancellor of Exchequer Osborne that he expects inflation to slow back to 2% target within a year. In addition, King said BoE is very conscious that there are risks to inflation in both directions and ready to either extend or reduce monetary stimulus as necessary.

As unveiled in the minutes released overnight, RBA considered a 'pause' in hiking interest rates in May 'owing to the uncertainty in the euro area'. Members discussed the 'disturbances in financial markets arising from concerns about sovereign debt in parts of Europe… There was a risk that the situation could worsen further, damaging the global economic recovery'. However, the direct impact of Greece on Australia was considered to be small, compared with stimulatory effects of the resources boom would be building over the year ahead, the central bank eventually decided to raise the policy rate for a 6th time. More in Aussie Heads To A 3-Month Low As RBA Indicates To Pause Rate Hike

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 91.80; (P) 92.44; (R1) 93.09;

As noted before, retreat from 93.62 should have completed at 91.75 already. Intraday bias is neutral for the moment. . Break of 93.62 will indicate that rise from 88.25 has resumed for 94.97 resistance. But we'd expect strong resistance from there to limit upside and bring another short term fall. On the downside, below 91.75 will bring another decline to 90.86 and below as consolidations from 94.97 continues.

In the bigger picture, recent volatility mixed up the overall outlook in USD/JPY and we'd stay neutral first. On the downside, break of 88.13 support will indicate that rise from 84.81 has completed at 94.97 already. The three wave corrective structure will in turn indicate that down trend from 124.13 is not completed yet and would bring another fall to 84.81 and below. On the upside, though, break of 94.97 will reaffirm the case that 84.81 is already the long term bottom and will target 101.43/65 medium term resistance zone for confirming this bullish case.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 22:45 NZD PPI - Inputs Q/Q Q1 1.30% 0.50% 0.30% 0.40% 22:45 NZD PPI - Outputs Q/Q Q1 1.80% 0.50% -0.40% -0.10% 23:50 JPY Tertiary Industry Index M/M Mar -3.00% -1.30% -0.20% -0.30% 01:30 AUD RBA Meeting Minutes -- -- 05:00 JPY Households Confidence Households Apr 42 42 40.9 08:30 GBP CPI M/M Apr 0.60% 0.40% 0.60% 08:30 GBP CPI Y/Y Apr 3.70% 3.50% 3.40% 08:30 GBP CPI Core Y/Y Apr 3.10% 2.90% 3.00% 08:30 GBP RPI M/M Apr 1.00% 0.50% 0.70% 08:30 GBP RPI Y/Y Apr 5.30% 4.80% 4.40% 09:00 EUR German ZEW (Economic Sentiment) May 45.8 47.1 53 09:00 EUR German ZEW (Current Situation) May -21.6 -33 -39.2 09:00 EUR Eurozone ZEW (Economic Sentiment) May 37.6 44.2 46 09:00 EUR Eurozone CPI M/M Apr 0.50% 0.40% 0.90% 09:00 EUR Eurozone CPI Y/Y Apr 1.50% 1.50% 1.40% 09:00 EUR Eurozone CPI Core Y/Y Apr 0.80% 0.80% 1.00% 12:30 CAD International Securities Transactions (CAD) Mar -0.62B 6.42B 6.720B 12:30 USD PPI M/M Apr -0.10% 0.10% 0.70% 12:30 USD PPI Y/Y Apr 5.50% 5.60% 6.00% 12:30 USD PPI Core M/M Apr 0.20% 0.10% 0.10% 12:30 USD PPI Core Y/Y Apr 1% 0.90% 0.90% 12:30 USD Housing Starts Apr 672K 650K 626K 12:30 USD Building Permits Apr 606K 675K 685K