Currency markets were showing signs of caution ahead of key risk events later in the day. Risk aversion supported gold and the yen. The euro and sterling held steady while the dollar index wallowed near seven-month lows. Investors are bracing for the European Central Bank’s policy meeting and for the UK general election. All eyes will also be on former FBI Director James Comey’s congressional testimony.

In terms of economic data, the downside miss on Australia’s April trade surplus pushed the aussie to a session low of $0.7524 before recovering to $0.7553 after better-than-expected trade data out of China, which is a major trading partner for Australia.

Other data out in the session showed Japan’s first quarter GDP data missed forecasts to rise 0.3% over the quarter versus 0.6% expected. The prior estimate was a rise of 0.5%. The yen was not greatly impacted by the data as the safe haven currency was being supported by risk aversion today. The greenback remained below the key 110-yen level during Asian trading today.

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During James Comey’s testimony, investors will be looking for any hints that US President Donald Trump may have been engaged in obstruction of justice, which is an offence that could lead to impeachment hearings. Comey will testify whether Trump asked him to drop the FBI investigation into fired National Security Adviser Michael Flynn. Political controversies surrounding the US President raise concerns among investors as they may delay passing legislation on Trump’s growth agenda.

Sterling traded at 2-week highs to reach $1.2968 as the latest UK election polls suggest Prime Minister Theresa May’s Conservatives Party will win a majority in today’s vote and this would be positive for the British currency.

The euro was steady against the dollar to trade in a range around $1.1260 during the Asian session as investors turn their focus to the ECB’s monetary policy announcement due later today. The central bank is widely expected to keep policy unchanged but markets will look for any hints on how and when it will start normalising its monetary policy.

Oil prices stabilized after a big tumble yesterday in reaction to the EIA report showing US crude inventories rose last week for the first time in 10 weeks, renewing concerns of a supply glut. WTI oil fell below $46 a barrel yesterday but rebounded slightly in Asia today to peak above the $46 mark.

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