Markets are rather steady today so far, waiting for the stimulus to trigger some volatility. Yen tried to resume recent rally earlier today but lacked follow through buying. On the dollar hand, dollar remains bounded in tight range against other major currencies. Data released in US saw PPI rose 0.3% mom in Apr dropped -3.7% yoy versus expectation of 0.1% mom, -3.9% yoy. Core PPI rose 0.1% mom, 3.4% yoy, inline with consensus. Jobless claims rebounded back to 637k.

In the monthly bulletin, the ECB said that the Eurozone 's headline annual inflation rate will likely decline further in coming months and reach negative level around mid-2009. HICP rate will stay below target of 2% in 2010. The central bank also stated that GDP contraction in 1Q0 was worse than expected but there have been signs of stabilization recently. Concerning monetary policies, the ECB said it will take time for policy action s to feed through the economy in full and there's no discussion on further steps other than purchase of covered bonds announced last week.

Meanwhile, markets continue to get diverse messages from ECB members on the asset-buying program. Kranjec said yesterday the ECB will likely buy more than than announced 60b euros covered bonds. However, a few hours after that, Weber insisted that 60b euros is the maximum. Nowotny suggested ECB could be more aggressive in the approach and didn't rule out purchase of corporate or even government bonds.

Switzerland's combined PPI surprisingly contracted -3.6% yoy in April (consensus: -2.8%; March: -2.8%), the sharpest fall in 2 decades, as the strength in Swiss franc pushed prices lower. On monthly basis, the reading also unexpectedly declined -0.2% mom in April (consensus: +0.6%), following a -0.5% drop in the previous month. The result highlighted the deflationary risk in Switzerland and should trigger the SNB to act more aggressive in currency intervention.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5050; (P) 1.5191; (R1) 1.5296

GBP/USD's fall from 1.5352 is still in progress and touches 4 hours 55 EMA in early US session. Intraday bias is cautiously on the downside as long as 1.5212 minor resistance holds and further fall could be seen towards outer channel support at 1.4658. Break there will be an early signal that whole rally from 1.3654 has completed and will put focus to 1.4395 support for confirmation. On the upside, above 1.5212 will turn intraday outlook neutral again first.

In the bigger picture, current rise from 1.3654 is still treated as part of the consolidation that started at 1.3503, which is correcting whole medium term decline from 2.0158. The question remains on how far such correction will go. We're still preferring that such correction will complete at 1.5371 resistance. However, based on current broad based weakness in dollar, firm break of 1.5371 will argue that stronger rise to next cluster resistance of 38.2% retracement of 2.0158 to 1.3503 at 1.6045 and 161.8% projection of 1.3503 to 1.4984 from 1.3654 at 1.6050 would be seen before completion. But in either case, focus will remain on reversal signal. Break of 1.4395 support will now be an important indicate that GBP/USD has topped out and will turn focus back to 1.3503 low.

Economic Indicators Update

07:15CHFSwiss Combined PPI M/M Apr-0.20%0.60%-0.50%
07:15CHFSwiss Combined PPI Y/Y Apr-3.60%-2.80%-2.80%
08:00EURECB Monthly Bulletin----
12:30USDPPI M/M Apr0.30%0.10%-1.20%
12:30USDPPI Y/Y Apr-3.70%-3.90%-3.50%
12:30USDPPI Core M/M Apr0.10%0.10%0.00%
12:30USDPPI Core Y/Y Apr3.40%3.40%3.80%
12:30USDInitial Jobless Claims637K608K601K
14:30USDNatural Gas Storage100B95B