Sterling dips across the board after a rather dovish Quarterly Inflation Report released from BoE today. Governor Mervyn King said that the economy will probably face a slow and protracted recovery. GDP is expected to trough at -4.5% in Q2 before resuming growth in early 2010, and hit around 2.5% growth in two years' time. But the outlook of growth is unusually uncertain. Inflation will probably trough at around 0.5% in Q4 of 2009 but stay below the 2% target before 2012.

GBP/USD is clearly losing upside momentum recently as it approaches 1.5371 resistance. But it remains to be seen on whether GBP/USD will top out before hitting this resistance level. GBP/JPY extends recent fall from 150.86 and is possibly heading to test trend line support at 142.3 level. Meanwhile, EUR/GBP rebounds strongly and is set to take on this week's high of 0.9036.

Also released today, Eurozone industrial production dropped more than expected by -2.0% mom, -20.2% yoy in March. Japan current account surplus widened to 902.3B yen in March, better than consensus of 513.5 B yen and 673.4B yen in the previous month. Also, M2 money supply and CD rose +2.6% yoy in April, also more than market expectation of +2.3% and +2.2% a month ago.

Focus now turns to retail sales from US. Headline retail sales probably slid -0.1% mom in April after dropping -1.1% a month ago while the reading excluding auto sales would have stayed flat, compared with a -0.9% drop in the previous month. Import price index should have gained +0.4% mom in April following a +0.5% increase in March. Moreover, business inventories is anticipated to have contracted -1.2% in March after declining -1.3% a month ago.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
23:50JPYJapan Current Account (Yen) Mar902.3B513.5B673.4B
23:50JPYJapan Money Stock M2+CD Y/Y Apr2.60%2.30%2.20%
5:00JPYJapan Eco Watchers Survey: Current Apr34.23028.4
9:00EUREurozone Industrial Production M/M Mar-2.00%-1.00%-2.30%-2.50%
9:00EUREurozone Industrial Production Y/Y Mar-20.20%-17.70%-18.40%-19.10%
9:30GBPBoE Quarterly Inflation Report----
12:30USDU.S. Retail Sales M/M Apr-0.10%-1.10%
12:30USDU.S. Retail Sales ex-Autos M/M Apr0.00%-0.90%
12:30USDU.S. Import Price Index M/M Apr0.40%0.50%
14:00USDU.S. Business Inventories Mar-1.20%-1.30%
14:30USDCrude Oil Inventories1.1M0.6M