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
|23:50||JPY||Japan Current Account (Yen) Mar||902.3B||513.5B||673.4B|
|23:50||JPY||Japan Money Stock M2+CD Y/Y Apr||2.60%||2.30%||2.20%|
|5:00||JPY||Japan Eco Watchers Survey: Current Apr||34.2||30||28.4|
|9:00||EUR||Eurozone Industrial Production M/M Mar||-2.00%||-1.00%||-2.30%||-2.50%|
|9:00||EUR||Eurozone Industrial Production Y/Y Mar||-20.20%||-17.70%||-18.40%||-19.10%|
|9:30||GBP||BoE Quarterly Inflation Report||--||--|
|12:30||USD||U.S. Retail Sales M/M Apr||-0.10%||-1.10%|
|12:30||USD||U.S. Retail Sales ex-Autos M/M Apr||0.00%||-0.90%|
|12:30||USD||U.S. Import Price Index M/M Apr||0.40%||0.50%|
|14:00||USD||U.S. Business Inventories Mar||-1.20%||-1.30%|
|14:30||USD||Crude Oil Inventories||1.1M||0.6M|