Markets are rather steady in early US session as most pairs are staying in tight range. Focus remains on broad based weakness in yen following poor inflation data released overnight, as well as strengthen in Sterling which is boosted by better than expected PMI manufacturing earlier today. Fed is rumored to be postponing the release of stress tests results, which was originally scheduled to release on May 4. For markets are speculating that Fed is close to offering investors five-year loans to buy commercial mortgage backed securities.

ISM manufacturing index released from US improved more than expected from 36.3 to 40.1 in April, better than consensus of 37.8. Price paid index rose from 31. to 33 versus expectation of 33.3. Improvement in the employment is also impressing as it rose from 28.1 to 34.4. University of Michigan consumer sentiment was unexpected revised from 61.9 to 65.1. Factory orders, though, dropped more than expected by -0.9% in March.

UK's manufacturing PMI improved to 42.9 in April, better than market expectation of 40 and 39.1 a month ago. Although there're signs showing that UK's economy has hit the bottom, further evidence is needed to confirm. Moreover, mortgage approvals rose 39K in March from 38K in February while M4 money supply increased +0.2% mom (February: 0%) and +17.8% (February: +17.6%) during the month. On the breakdown on M4 money supply, we are yet to see much impact from BOE's QE policies on households and businesses.

Released earlier, Japan CPI contracted -0.3% yoy in March, from -0.1% a month while core inflation eased to -0.1% during the month, the first annual decline since September 2007. As a leading indicator to the nation's inflation outlook, Tokyo CPI stayed flat in April, compared with consensus of +0.1% and +0.2% in March. Unemployment rate in Japan rose to 4.8% in March (consensus: 4.5%), the highest since 1967, from 4.4% a month ago. Deteriorated job market has weighed on consumption and household spending declines -3.7% yoy in March, worse than market expectation of -2.7% and -3.5% in the previous month.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4677; (P) 1.4813; (R1) 1.4923

GBP/USD rebound strongly today but after all it's still limited below 1.4945 resistance. Intraday outlook remains neutral for the moment. On the upside, above 1.4945 will suggest that rebound from 1.4395 is resuming but after all, we'd still expect strong resistance between 1.5066 and 100% projection of 1.3503 to 1.4984 from 1.3654 at 1.5135 and bring reversal. On the downside, below 1.4515 minor support will indicate that choppy rise from 1.4395 has completed and should bring fall resumption towards 1.4109 support.

In the bigger picture, price actions from 1.3503 are treated as consolidation to the five wave sequence from 2.0158 (1.7445, 1.8668, 1.4557, 1.5722, 1.3503). Such consolidation might have completed with three waves up to 1.5066. Even in case of another rise, we're still expecting GBP/USD to top out at 100% projection of 1.3503 to 1.4984 from 1.3654 at 1.5135. Below 1.4395 support will be another sign of topping while break of 1.4109 will confirm this bearish case. However, firm break of 1.5135 fibo target will dampen this view and set the stage for stronger rally towards resistance zone of 1.5722 and 38.2% retracement of 2.0158 to 1.3503 at 1.6045.

Economic Indicators Update

23:30JPYJapan National CPI Y/Y Mar-0.30%-0.30%-0.10%
23:30JPYJapan National CPI Core Y/Y Mar-0.10%0.10%0.20%
23:30JPYJapan Tokyo CPI Y/Y Apr0.00%0.10%0.20%
23:30JPYJapan Unemployment Rate Mar4.80%4.50%4.40%
23:30JPYJapan Household Spending Y/Y Mar-3.70%-2.70%-3.50%
08:30GBPU.K. Mortgage Approvals Mar39K40K38K
08:30GBPU.K. PMI Manufacturing Apr42.94039.1
08:30GBPU.K. M4 Money Supply M/M MAR0.20%--0.00%
08:30GBPU.K. M4 Money Supply Y/Y MAR17.80%--17.60%
14:00USDU.S. ISM Manufacturing Apr40.137.836.3
14:00USDU.S. ISM Prices Paid Apr3233.331
14:00USDU.S. U. of Michigan Confidence Apr F65.161.561.9
14:00USDU.S. Factory Orders Mar-0.90%-0.70%1.80%