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Germany GDP grew 0.4% qoq in Q1, matched market expectation. That was also a significant improve over Q4's 0.0% growth. The quarter-on-quarter comparison (price-, seasonally and calendar-adjusted) shows that positive contributions mainly came from domestic demand.

Fixed capital formation in construction and in machinery and equipment increased considerably. Household final consumption expenditure, too, increased substantially. However, government final consumption expenditure recorded a decline. And there were mixed signals regarding foreign trade; as both exports and imports increased.

Economy Minister Peter Altmaier said the growth figures were a "first ray of hope" following two quarters without expansion. However, he warned that " international trade disputes are still unresolved". He urged , "we must do everything possible to find acceptable solutions that enable free trade".

Daily Pivots: (S1) 1.1211; (P) 1.1237; (R1) 1.1251; More.....

Intraday bias in EUR/USD remains neutral first and consolidation from 1.1111 could extend further. In case of another rise, upside should be limited well below 1.1324 resistance to bring fall resumption. On the downside, below 1.1173 minor support will turn bias to the downside for 1.1111 low. Break will extend down trend to 100% projection of 1.1448 to 1.1183 from 1.1324 at 1.1059. Break will target 161.8% projection at 1.0895.

In the bigger picture, down trend from 1.2555 (2018 high) has just resumed. 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186 was also taken out. Current fall should now target 78.6% retracement at 1.0813. Sustained break there will pave the way to retest 1.0339. On the downside, break of 1.1448 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Daily Pivots: (S1) 1.2881; (P) 1.2926; (R1) 1.2949; More....

Fall from 1.3176 is still in progress and intraday bias in GBP/USD remains on the downside for 1.2865 support. Decisive break there will revive the bearish case that rebound from 1.2391 has completed at 1.3381. Near term outlook will turn be turned bearish and deeper decline should be seen through 1.2773 support to retest 1.2391 low. On the upside, above 1.3040 minor resistance will turn bias back to the upside for 1.3176 resistance instead.

In the bigger picture, medium term decline from 1.4376 (2018 high) halted and made a medium term bottom after hitting 1.2391. Rebound from 1.2391 is seen as a corrective move for now. In case of another rise, strong resistance could be seen around 61.8% retracement of 1.4376 to 1.2391 at 1.3618 to limit upside. On the downside, break of 1.2773 support will suggests that such corrective rise is completed and bring retest of 1.2391 low first.

Daily Pivots: (S1) 1.0059; (P) 1.0078; (R1) 1.0106; More...

Intraday bias in USD/CHF remains neutral for consolidation above 1.0050 temporary low. Upside of recovery should be limited by 1.0126 support turned resistance to bring another decline. On the downside, break of 1.0050 will resume the fall from 1.0237 to retest 0.9879 key support. Though, firm break of 1.0126 will turn bias back to the upside for 1.0237 resistance.

In the bigger picture, as long as 0.9879 support holds, medium term up trend form 0.9186 is still in progress. Break of 1.0237 will target 1.0342 resistance next. For now, we'd be cautious on strong resistance from there to limit upside, until we see medium term upside acceleration. However, decisive break of 0.9879 will be a strong sign of medium term reversal. Focus will be turned back to 0.9716 support for confirmation.

Daily Pivots: (S1) 109.24; (P) 109.51; (R1) 109.87; More...

No change in USD/JPY's outlook. With 110.04 resistance intact, further decline is still expected. Fall should 112.40 would target to retest 104.69 low. Nevertheless, break of 110.04 minor resistance will indicate short term bottom. Lengthier consolidation could be seen before another decline.

In the bigger picture, USD/JPY is staying inside falling channel from 118.65. Currently development suggests that rebound from 104.69 is only a corrective move. And fall from 118.65 is not completed yet. Decisive break of 104.69 will extend the down trend towards 98.97 support (2016 low). For now, we'd expect strong support above there to bring rebound.

Daily Pivots: (S1) 1.3450; (P) 1.3471; (R1) 1.3486; More...

No change in USD/CAD's outlook as it's staying in consolidation from 1.3521. Intraday bias remains neutral first. More sideway trading could be seen and in case of another fall, downside should be contained above 1.3274 support to bring rally resumption. On the upside, firm break of 1.3521 will resume the whole rise from 1.3068 to retest 1.3664 high. However, decisive break of 1.3274 support will indicate completion of rise from 1.3068 and turn outlook bearish.

In the bigger picture, USD/CAD is staying well inside medium term rising channel (support at 1.3278). Thus, the up trend from 1.2061 (2017 low) should be in progress. On the upside, decisive break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 will pave the way to 78.6% retracement at 1.4127 next. This will remain the favored case as long as 1.3068 support holds. However, sustained break the channel support will be the first sign of medium term reversal. Firm break of 1.3068 would confirm.

Daily Pivots: (S1) 0.6933; (P) 0.6947; (R1) 0.6958; More...

AUD/USD's fall continues today and reaches as low as 0.6922 so far today. Intraday bias remains on the downside for 100% projection of 0.7295 to 0.7003 from 0.7205 at 0.6913. Decisive break there will indicate further downside acceleration. Further decline would be seen to retest 0.6722 low. On the upside, above 0.6964 minor resistance will turn intraday bias neutral for consolidations. But recovery should be limited by 0.6988/7069 resistance zone to bring fall resumption.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

After some initial hesitation, Asian markets picked up some momentum and strengthen broadly, recovering some of this week's losses. Though, strength is so far limited with lots of uncertainty ahead. It's a fact that US-China trade war is dragging on for longer despite Trump's "positive" words. At the same time, April data from China showed that March rebound was just temporary. Slowdown in the economy is still in progress, even before collapse of trade negotiations. With new round of tariffs, it's not optimistic for China to bottom out soon.

In the currency markets, Australian Dollar is currently the weakest one for today. Weaker wage than expected wage growth in Q1 is another drag on the Aussie. New Zealand Dollar and Yen follow as next weakest. Sterling and Euro are the strongest ones for today, followed by Canadian. The Loonie will need some solid reading from toady's CPI release to revive recent rebound. For the week, Swiss Franc, Yen and Dollar are the strongest in order. Aussie, Sterling and Kiwi are the weakest.

Technically, as AUD/USD's decline extends, focus is on 0.6913 fibonacci projection level. Decisive break there, with downside acceleration, will solidify the case for larger down trend resumption. USD/JPY and EUR/JPY staying in consolidation. Focuses will be on 109.02 and 122.48 temporary lows respectively, for indication of fall resumption. USD/CAD will be a pair to watch today. It's staying in consolidation inside 1.3376/3521. Technically, we'd favor an upside breakout soon.

In Asia, Nikkei closed up 0.56%. Hong Kong HSI is up 0.98%. China Shanghai SSE is up 1.76%, back above 2900 handle. Singapore Strait Times is down -0.07%. Japan 10-year JGB yield is down -0.0008 at -0.052. Overnight, DOW rose 0.82%. S&P 500 rose 0.80%. NASDAQ rose 1.14%. 10-year yield rose 0.014 to 2.419. 2.4 level will remain a level to watch today.

China said to scrapped 30% of of draft trade agreement, Mnuchin going to Beijing again soon

Nikkei Asia Review reported that China scrapped as much as 30% of the draft trade agreement with US, before the negotiation collapsed. The original 150-page document was reduced to 105 pages. According to unnamed source, Chinese President Xi deemed legally binding parts of the draft text to be tantamount to "an unequal treaty." And all relevant parts of the inequality were deleted or revised.

On the other hand, Trump tried to tone down the situation and said said "we're having a squabble with" China only., and "we have a dialogue going. It will always continue." Treasury spokesman also indicated that Steven Mnuchin will plan for another meeting with China, without details. The spokesman said: "As the secretary has indicated, the negotiations will continue. We do anticipate, as the secretary indicated yesterday, that we will plan for a meeting in China at some point soon." However, nothing is heard from Trade Representative Robert Lighthizer yet.

China retail sales growth slowed to lowest since 2003, industrial production and fixed asset investment missed too

Despite the rebound in US stocks overnight, Asian markets are mixed. Upside of recovery was capped by poor data from China. It's now rather apparent that the rebound in March was just temporary due to seasonal reasons. The slowdown in China is in place and could even worsen further as trade war with US drags on.

China industrial production growth slowed to 5.4% yoy in April, missed expectation of 6.5% yoy. That's also sharp deterioration from 4-year high of 8.5% yoy in March. Fixed-asset investment growth slowed to 6.1% ytd yoy, down from 6.3% and missed expectation of 6.4%.

More seriously, retail sales growth slowed to 7.2% yoy, down from 8.7% yoy and missed expectation of 7.2% yoy. That's also the lowest growth since May 2003. That dents hope of shifting the burden of the economy from exports to domestic demand growth. Unemployment rate, though, dropped to 5.2%.

Aussie drops after wage price miss, consumer sentiment barely rose

Australian Dollar weakens broadly today and is trading as the worst performing one for today. The Aussie is partly dragged down by poor Chinese data. It's own data provide no help too.

Wage Price Index rose only 0.5% qoq in Q1, below expectation of 0.6% qoq. ABS Chief Economist Bruce Hockman said: "Annual wages in seasonally adjusted terms grew 2.3 per cent for the third quarter in a row. The main contributors to growth over the quarter were regularly scheduled wage rises in the Health care and social assistance and Education and training industries, as was the case in the previous March quarter."

Westpac Consumer Sentiment rose 0.3% to 101.3 in May, up from 100.7. Westpac noted that easing bias was delivered by RBA at last week's meeting, with growth and inflation forecasts lowered to "barely acceptable" levels. More importantly, such forecasts are based on market pricing for a full rate cut for. Westpac maintained that the tensions between strong labor market and weak GDP will be resolved over the next few months. And the case of August RBA cut would become clear.

UK PM May plans to bring back Brexit bill on June 3

UK Prime Minister Theresa May laid out her "plan" to complete the Brexit withdrawal agreement by the end of next month. Her spokesman said May is planning to put forward the bill again in the week beginning June 3. And he added "it is imperative we do so then if the UK is to leave the EU before the summer parliamentary recess."

May's Cabinet agreed to press head with talk with opposite Labour a meeting. As "Ministers involved in the negotiations set out details of the compromises which the government was prepared to consider in order to consider an agreement which would allow the UK to leave the EU with a deal as soon as possible." And, "it was agreed that it is imperative to bring forward the Withdrawal Agreement Bill in time for it to receive royal assent by the summer parliamentary recess."

However opposition Labour leader Jeremy Corbyn remained doubtful on the May's plan. His spokesman said Corbyn raised doubts over the credibility of government commitments, following statements by Conservative MPs and cabinet ministers seeking to replace the prime minister."

Looking ahead

Eurozone GDP and employment, German GDP will be released in European session. But major focuses will be in the US session. Canada CPI will be a key data to watch to gauge BoC's rate path. US will release retail sales, industrial production, Empire state manufacturing, NAHB housing index and business inventories.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6933; (P) 0.6947; (R1) 0.6958; More...

AUD/USD's fall continues today and reaches as low as 0.6922 so far today. Intraday bias remains on the downside for 100% projection of 0.7295 to 0.7003 from 0.7205 at 0.6913. Decisive break there will indicate further downside acceleration. Further decline would be seen to retest 0.6722 low. On the upside, above 0.6964 minor resistance will turn intraday bias neutral for consolidations. But recovery should be limited by 0.6988/7069 resistance zone to bring fall resumption.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

General Trend:

• Trump commented on Tuesday morning: Trade talks with China have not collapsed; we continue to have dialogue going with China
• Chinese equities rise amid focus on trade; bond yields decline after weaker April data, previously announced targeted RRR cut partially takes effect
• Nissan Motor and Takeda decline on outlooks, weigh on Nikkei
• Japan megabank earnings seen after the close
• Taiwan's Hon Hai declines on weaker than expected earnings
• Aussie y/y wages hold steady in Q1
• BoJ Gov Kuroda: Not considering additional easing now
• Korean Won (KRW) weakens amid disappointing jobs data
• China Tech earnings in focus: Tencent and Alibaba are due to report later today

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) AUSTRALIA Q1 WAGE PRICE INDEX Q/Q: 0.5% V 0.6%E; Y/Y: 2.3% V 2.3%E
• (AU) Australia May Westpac Consumer Confidence Index: 101.3 v 100.7 prior; m/m: 0.6% v 1.9% prior
• (AU) Australia sells A$900M v A$900M indicated in 2.75% April 2024 bonds, avg yield 1.3028%, bid to cover 2.84x
• VLW.AU Gives Q3 update: sales 783; Both carried forward sales and new sales are taking longer than anticipated to settle; Will not give guidance for FY19
• SBM.AU To acquire Canada's Atlantic Gold Corp for C$802M; announces A$490M entitlement offering at A$2.89/share

Japan

• Nikkei 225 opened +0.2%
• (JP) BoJ Gov Kuroda: Reiterates BoJ commitment is vital to keep inflation stable, will consider additional easing if price momentum is lost (options include rates, asset purchases), not considering additional easing now
• 4568.JP FDA votes 12-3 in favor of Tenosynovial treatment of Giant Cell Tumor; Benefit of drug outweights the risks; FDA panel votes 3-8 against approval of quizartinib
• 6740.JP Said to consider cutting 1,000 jobs (20% of total workforce), expected to announce structural reforms and ¥70B impairment on Hakusan plant alongside full-year earnings today - Japanese Press
• 7201.JP Reports FY18/19 Net ¥746.9B adj v ¥319.1B y/y; Op ¥318.2B v ¥574.8B y/y; Rev ¥11.6T v ¥12.0T y/y; Issues investigation report on former Chairman Ghosn misconduct
• (JP) Japan Apr Money Supply M2 y/y: 2.6% v 2.3%e; M3 y/y: 2.2% v 2.1%e
• (JP) Japan Fin Min Aso: Sales tax increase to 10% in Oct needed for social security

Korea

• Kospi opened -0.1%
• (KR) South Korea Apr Unemployment Rate: 4.1% v 3.8%e
• (KR) South Korea Fin Min Hong: Reiterates will respond to any herd behavior in currency market if seen. FX market volatility are increasing
• (KR) South Korea sells 2-yr Monetary Stabilization Bonds (MSB), avg yield 1.725% v 1.76% prior

China/Hong Kong

• Hang Seng opened +0.2%; Shanghai Composite opened +0.7%
• (CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 5.4% V 6.5%E; YTD Y/Y: 6.2% V 6.5%E
• (CN) China National Bureau of Statistics (NBS): Fluctuations in industrial production partially due to VAT reduction; To properly adopt countercyclical adjustment on economy - comments after April data releases
• (CN) CHINA APR RETAIL SALES Y/Y: 7.2% V 8.6%E (lowest level since May 2003); RETAIL SALES YTD Y/Y: 8.0% V 8.4%E
• (CN) China Apr Surveyed Jobless Rate: 5.0% v 5.2% prior
• (CN) China Foreign Ministry spokesperson Geng Shuang: US repeatedly tried to change the terms of the negotiations midway through the talks, tried to force China to increase the volume of goods it was willing to buy from the US as part of agreement, going against agreement made in Dec
• (CN) China PBoC: First phase of previously announced lower RRR adjustment is effective on Wed (May 15th), to release ~CNY100B in long-term funds
• (CN) China Global Times Editor-in-chief Hu Xijin: trade dispute may last longer than many think it will
• (CN) China PBoC Open Market Operation (OMO): Skips for 4th consecutive session: Net injection: CNY10B drain v CNY267.4B 1-yr targeted MLF prior
• (CN) China PBoC sets yuan reference rate: 6.8649 v 6.8365 prior (weakest fix since Dec 27 2018)
• (US) US President Trump suggests that China will ease to offset impact of trade war and if the Fed were to match it they would win - tweet
• (CN) China Apr YTD Fixed Urban Assets Y/Y: 6.1% v 6.4%e
• (CN) China Apr Property Investment YTD y/y: 11.9% v 11.8% prior
• (CN) China President Xi: International situation is more volatile and uncertain - speaking at Asian Civilizations Conference

Other Asia

• STEL.SG Reports Q4 (S$) net 773M v 770M y/y; EBITDA B v 1.24B y/y; Rev 4.34B v 4.26B y/y; Guides initial FY20 EBITDA stable y/y; Rev higher by mid single digits, FCF ~S$2.1B
• 2382.TW Exec: Moving operations out of China are not cheaper than facing tariffs, due to logistical costs and lack of supply chains - post earnings comments

North America

• (US) Weekly API Oil Inventories: Crude: +8.6M v +2.8M prior
• (US) Canada Foreign Minister Freeland's scheduled visit tomorrow said to come after movement on steel and aluminum tariffs, but deal sill likely far off – press
• (US) Fed's Daly (dove, non-voter): US economic recovery and expansion don't look as sluggish in context of financial crisis and aging population
• (CN) US President Trump is expected to sign executive order this week which bans US companies from using telecom equipment that poses national security risks - US financial press
• (MX) Mexico Economy Min: Thinks officials are close to negotiating the lifting of US tariffs on steel and aluminum - financial press

Europe

• (UK) Labour Leader Corbyn reiterated to PM May today that Labour will not back her Brexit plan without concessions
• (UK) Govt confirms it will put Brexit bill to a vote in Parliament the week of June 3rd

Levels as of 1:20 ET

• Nikkei 225, +0.4%, ASX 200 +0.8%, Hang Seng +0.7%; Shanghai Composite +1.3%; Kospi +0.6%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.3%, Dax +0.1%; FTSE100 +0.3%
• EUR 1.1211-1.1200 ; JPY 109.69-109.51 ; AUD 0.6949-0.6921 ;NZD 0.6579-0.6562
• Gold flat at $1,296/oz; Crude Oil -0.7% at $61.36/brl; Copper +0.5% at $2.736/lb

Market movers today

Trade tensions between the US and China continue to be the key driver for markets (more in selected news).

On the data front, the main releases will be US retail sales for April and the US Empire business survey index for May. We expect retail sales to continue to show strength but would keep in mind the data is quite volatile on a monthly basis. Retail sales bounced back strongly in March after a weak start to the year. The Empire index will give us the first survey for May. We also get the first estimate of German GDP growth in Q1. We expect 0.4% q/q

In Scandi, we have Swedish inflation expectations from Prospera and Norwegian trade balance figures.

Selected market news

Things have calmed down a bit on the surface between the US and China on the trade war with no new issues to fuel the fire yesterday. Trump tweeted yesterday: "When the time is right we will make a deal with China". After adding that this must be a great deal for the US, he says: "It will happen, and much faster than people think!". It still seems every time stock markets are down, he starts tweeting about a deal coming. However, the nationalistic sentiment is growing on both sides and that could make it even harder to get a deal done. One of the key challenges regards China's willingness to change its laws, which is apparently a red line for China. But also one of the key requirements from the US. Will Trump be willing to sacrifice this demand? The next thing to look out for is whether a new round of talks is announced at some point or a potential phone call between Xi and Trump. Both might dampen the fears for a while. However, new talks are no guarantee of a deal and we see it as increasingly likely that it will take more financial stress for the two sides to feel enough pressure to find a compromise. This could easily drag into H2, see also US-China Trade: Back in the tit-for-tat spiral , 13 March 2019.

As a result, risk sentiment was holding up yesterday, sending equities higher by around 0.8% in the US and slightly more in Europe. This comes after the dreadful day on Monday with equities down markedly.

Adding to the risk factors, note also that by Saturday, 18 May, Trump has to decide on the potential of tariffs on European vehicles. While we do not expect Trump to go ahead with the tariffs, we should keep an eye on a potential new risk factors for the European/global economy. Should he go ahead, the tariffs must either be implemented within 15 days or he can delay implementation by 180 days if negotiations with the EU start (the latter may be more likely).