While gold extends the uptrend and makes another record high of 1245.4 today, the forex markets are rather quiet. US trade deficit widened to one year high of -$40.4b in March. Both exports and imports rose rapidly, jumping 3.2% and 3.1% respectively, which is consistent with global economic recovery. Canada trade surplus narrowed to CAD 0.3b in March which new housing price index rose 0.3% mom. Nevertheless, markets have little reaction to the data.

Pound reverses early gains after BOE Governor Mervyn King delivered dovish comments at a press conference following release of the quarterly inflation report. Similar to February's outlook, policymakers forecast GDP growth will reach +3.5% by 2010 while inflation will stay below 2% target. The forecasts are based on the interest rate staying close to its record low of 0.5% this year and reaching 1.7% by the end of 2011.

Conservative leader Cameron pledged to cut the record budget deficit and his Chancellor of Exchequer Osborne will publish an emergency budget within 50 days to cut GBP 6b of the deficit. Also, the conservatives will introduce levy on banks, commission to investigate splitting retail from investment banking, plans to limit bonuses, and measures to increase lending to businesses. Data from UK saw jobless claims dropped more than expected by -27.1k in April while unemployment rate was unchanged at 8.0% in March.

To meet EU deficit targets, Spain Prime Minister Jose Luis Rodriguez Zapatero announced to cut civil servants pay by 5% this year and freeze it in 2011. There will also be cut on investment spending, pensions and 13,000 public sector jobs. Portugal finance minister Fernando Teixeira dos Santos said there will be new measures for deeper spending cuts and will have an announcement after discussion with oppositions. Data from Eurozone saw Q1 GDP rose 0.2% qoq, 0.5% yoy. Industrial production rose 1.3% mom , 6.9% in March.

But after all, Euro remains generally weak in crosses. EUR/CAD edges lower to 1.2865 so far today and recent down trend is still in progress for mentioned target of 138.2% projection of 1.7499 to 1.5183 from 1.6006 at 1.2805.

Sterling is also weak against Canadian dollar. GBP/CAD's break of 1.5114 support indicates that medium term down trend has resumed and the cross should now be targeting 61.8% projection of 1.7282 to 1.5114 from 1.5879 at 1.4539.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4780; (P) 1.4892; (R1) 1.5064;

Intraday bias in GBP/USD remains neutral as today's recovery was limited by 1.5053 resistance and the pair weakens again. On the downside, below 1.4719 minor support will reaffirm the case that rebound from 1.4475 is finished and will flip intraday bias back to the downside for retesting this low. On the upside, break of 1.5035 will bring another rise and put 1.5521 key resistance back into focus.

In the bigger picture, as noted before, corrective rise from 1.3503 should have completed at 1.7043 already and fall from there is tentatively treated as resumption of the whole down trend from 2007 high of 2.1161. Such fall should target 61.8% projection of 2.1161 to 1.3503 from 1.7043 at 1.2310 after taking out 1.3503 low. On the upside, break of 1.5521 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 01:30 AUD Home Loans Mar -3.40% -2.90% -1.80% -2.00% 05:00 JPY Leading Index Mar P 102.8 99.3 98.5 98.4 06:00 EUR German GDP Q/Q Q1 P 0.20% 0.00% 0.00% 0.20% 07:15 CHF Producer & Import Prices M/M Apr 0.60% 0.40% 0.50% 07:15 CHF Producer & Import Prices Y/Y Apr 0.80% 0.60% 0.00% 08:30 GBP Jobless Claims Change Apr -27.1K -20.0K -32.9K -32.7K 08:30 GBP Claimant Count Rate Apr 4.70% 4.80% 4.80% 08:30 GBP ILO Unemployment Rate (3M) Mar 8.00% 8.00% 8.00% 09:00 EUR Eurozone GDP Q/Q Q1 A 0.20% 0.10% 0.00% 09:00 EUR Eurozone GDP Y/Y Q1 A 0.50% 0.50% -2.20% 09:00 EUR Eurozone Industrial Production M/M Mar 1.30% 1.00% 0.70% 0.70% 09:00 EUR Eurozone Industrial Production Y/Y Mar 6.90% 6.50% 4.00% 3.90% 09:30 GBP BoE Quarterly Inflation Report -- -- 12:30 CAD Trade Balance (CAD) Mar 0.3B 1.6B 1.4B 12:30 CAD New Housing Price Index M/M Mar 0.30% 0.30% 0.10% 12:30 USD Trade Balance Mar -40.4B -$39.9B -$39.7B 14:30 USD Crude Oil Inventories 1.0M 2.8M 18:00 USD Monthly Budget Statement Apr -$20.0B -$20.9B