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The British pound has continued to move lower against the US dollar during the European trading session, with the pair falling towards key neckline support. If bears trigger the neckline of the head and shoulders pattern further downside towards the 1.2985 support level seems likely. Technical indicators for the GBPUSD pair across the four-hour time frame are also starting to turn lower.

The GBPUSD pair is bearish while trading below the 1.3100 level, key intraday support is found at the 1.2985 and 1.2940 levels.

If the GBPUSD pair trades above the 1.3060 level, key intraday resistance is found at the 1.3100 and 1.3125 levels.

The US dollar is consolidating around the 112.00 level against the Japanese currency, with the pair failing to react to better than expected Chinese GDP figures earlier today. If bulls are unable to ignite the bullish inverted head and shoulders pattern the USDJPY pair could slip back towards the 111.60 support level. If bulls break through the 112.00 level, major weekly resistance for the pair is located around the 113.20 level.

The USDJPY pair is bullish while trading above the 111.60, key intraday resistance is found at the 112.00 and 113.20 levels.

If the USDJPY pair fails at current levels, key intraday support is found at the 111.80 and 111.60 levels.

Weaker than expected UK inflation data (Mar CPI 1.9% y/y vs 2.0% f/c) push sterling further down on Wednesday, as lower inflation reinforces idea that BoE is unlikely to increase interest rates in the near future.

Extension of strong fall previous day (0.39%) reinforces negative signal from Tuesday's bearish outside day.

Near-term focus shifts lower, exposing psychological 1.30 support, which should keep dips contained and guard key support at 1.2971 (200SMA). Daily momentum remains firm and attempts to break into positive territory that supports scenario of limited dips, but conflicts with bearishly aligned stochastic and 10,20,30SMA's.

Hopes for fresh upside attempts would remain alive while 1.3000/1.2971 pivots hold, however, lift above a cluster of daily MA's/daily cloud top/Fibo 38.2% of 1.3381/1.2977 (between 1.3060 and 1.3131) is needed to confirm bullish scenario.

Lower volumes on pre-holiday thinned market may keep the pair within existing range with absence of Brexit news adding to scenario.

Res: 1.3061, 1.3089, 1.3100, 1.3131
Sup: 1.3031, 1.3000, 1.2971, 1.2949

Notes/Observations

• China data helps to ease concerns over any lasting global economic slowdown; core yields pushing higher as a result
• UK Mar CPI YoY reading remained blow the BOE target for the 3rd straight month (1.9% v 2.0%e)

Asia:

• Chinese economy performed better-than-expected in Q1 with data pushing the local overnight repo rate to a 4-year high of 3.00% over concern of a more hawkish PBOC. Rates have continued to rise despite the earlier announced medium-term lending facility (MLF) operation by the PBOC in which the 1-year MLP injected much less liquidity into the market as was expecting
• China Q1 GDP Q/Q: 1.4% v 1.4%e; Y/Y: 6.4% v 6.3%e
• China Mar Industrial Production registered its fastest growth since July 2014 (Y/Y: 8.5% v 6.0%e v % prior
• China Mar Retail Sales Y/Y: 8.7% v 8.4%e
• China Mar Jobless Rate: 5.2% v 5.3% prior
• New Zealand Q1 CPI Q/Q: 0.1% v 0.3%e; Y/Y: 1.5% v 1.7%e
• Japan Mar Trade Balance: ¥528.5B v ¥363.2Be Exports saw its 4th straight decline (Y/Y: -2.4% v -2.6%e – - Japan Trade Min Motegi: Trade talks with US focused on goods including autos and agricultural, good start to talks, No agreement reached yet

Europe:

• Eurogroup chief Centeno stated that Euro Area budget won't start as a 'bazooka'. He added that it was high time for budget execution and delivery in Italy and that Germany should use its fiscal leeway to support economic recovery
• ECB's Nowotny (Austria): saw 'nervousness' regarding Europe at the IMF meeting; No official plans on Tiering. No reason to change guidance

Americas:

• US Trade Representative (USTR) confirmed US and Japan discussed trade involving goods and agriculture; US raised concerns about 'very large' trade deficit with Japan. Parties agreed to meet again

Energy:

• Weekly API Oil Inventories: Crude: -3.1M v +4.1M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.16% at 388.58, FTSE -0.09% at 7,463.25, DAX -0.02% at 12,099.39, CAC-40 +0.09% at 5,533.83, IBEX-35 +0.26% at 9,521.68, FTSE MIB +0.22% at 21,967.50, SMI +0.03% at 9,582.50, S&P 500 Futures +0.17%]
• Market Focal Points/Key Themes: European Indices trade mixed this morning following a mostly higher session in Asia and stronger US futures. Bund futures trades over 30 ticks lower following upbeat China data over night. On the corporate front we have seen a pick up in earnings with major Swiss name ABB a notable riser after a rise in profits and Revenue which beats forecasts; Roche gains on a Rev beat and raised guidance; TomTom also rises after a strong Revenue beat and affirmed outlook, while ASML handily beat top and bottom line forecasts as shares rise over 2%; Ericsson, Barco, Vopak and Zur Rose are among other notable risers this morning on earnings. Meanwhile French traded Danone trades lower after inline Revenue numbers; BHP is another decliner after cutting full year guidance, and as Vale is set to resume output at Iron Ore mine. Else UK traded Carclo declines over 30% following a profit warning; Bunzl falls following a trading update and acquisition of distributor firm Colpack, while Zoo Digitial, Hunting and Svenska Handelsbanken are among other decliners on earnings. In other news Tele Columbus continues to see follow through rising another 12% after an upgrade at Barclays, while GenSight Biologics gains on positive RESCUE Phase III data. In the US Qualcomm is a notable rise after settling its royalty dispute with Apple, while Netflix declines following weaker subscribe guidance for Q2. Looking ahead notable earners include PepsiCo, Morgan Stanley, Textron, Pentair, and Abbott.

Equities

• Consumer discretionary: Bunzl [BZNL.UK] -11% (trading update), L'Oreal [OR.FR] -0.5% (Q1 Rev), Danone [BN.FR] -2.0% (earnings), Pendragon [PDG.UK] -6% (trading update)
• Materials: BHP Billiton [BLT.UK] -2.5% (production results)
• Financials: Santander [SAN.ES] +1%, Credit Agricole [ACA.FR] +1% (MoU), Commerzbank [CBK.DE] +3% (reportedly rejected formal talks with ING)
• Healthcare: Roche Holding [ROG.CH] -0.5% (earnings)
• Industrials: ABB [ABBN.CH] +5.5% (new CEO; earnings)
• Technology: Wirecard [WDI.DE] +3.5% (Bafin report), ASML [ASML.NL] +3% (earnings), Dialog Semiconductor [DLG.DE] +1% (Apple/Qualcomm settlement), NCC Group [NCC.UK] +2% (takeover talks)
• Telecom: Ericsson [ERICB.SE] +4.5% (earnings), Deutsche Telecom [DTE.DE] -2% (Sprint/T-Mobile deal unlikely to be approved as currently structured), Elisa [ELISA.FI] +1% (earnings)

Speakers

• ECB's Hansson (Estonia) reiterated Council view that economic growth to pick up in H2
• Germany Economy Ministry updated its economic forecasts cut its 2019 GDP growth from 1.0% to 0.5% (as speculated)
• Germany Econ Min Altmaier stated that the domestic economy did not need a stimulus package
• Italy Fin Min Tria on budget outlook: govt was not overly optimistic on the growth forecasts. Govt planned to reduce the growth gap with EU. Stated that 2019 GDP growth forecast reflected expectations of a slight recovery in H1 followed by a stronger pick-up
• German Cabinet approved its 2019 debt to GDP ratio forecast of 58.8% (as speculated). **Note: Under the Maastricht Treaty the ideal level is below 60%
• Czech Central Bank Holub (chief economist): The next 2-3 policy meetings were a window of opportunity for Czech hikes. Saw one rate hike in 2019 as the most likely scenario. The delay to Brexit has potentially given the Czech central bank a small window to raise borrowing costs this year
• China Govt said to be considering easing car purchase restrictions

Currencies/Fixed Income

• Better Chinese data helped to sooth concerns over the lasting effects of the recent global economic slowdown and put some reversal in safe-haven plays..
• EUR/USD higher by 0.3% to test 3-week highs and back above the 1.13 level as better China data fanning hopes of a gradual economic recovery in the euro zone as well. Focus turned to the upcoming PMI data for the major European countries set for release in tomorrow's session (Thursday)
• UK Mar inflation data was slightly below expectations with the annual pace of CPI remainsing beow the BOE target for the 3rd straight month. GBP/USD saw its slight gains wilt away as a result. Pair around 1.3045 area just ahead of the NY morning

Economic Data

• (EU) Euro Zone Mar EU27 New Car Registrations: -3.9% v -1.0% prior (7th straight decline)
• (AT) Austria Mar CPI M/M: 0.9% v 0.0% prior; Y/Y: 1.8% v 1.5% prior
• (EU) Euro Zone Feb ECB Current Account: €26.8B v €37.1B prior
• (IT) Italy Mar Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: 1.0% v 1.0% prelim; CPI Index (Ex-Tobacco): 102.5 v 102.3 prior
• (IT) Italy Mar Final CPI EU Harmonized M/M: 2.3% v 2.3% prelim; Y/Y: 1.2% v 1.1% prelim
• (ZA) South Africa Mar CPI M/M: 0.8% v 0.9%e; Y/Y: 4.5% v 4.6%e
• (ZA) South Africa Mar CPI Core M/M: 0.7% v 0.8%e; Y/Y: 4.4% v 4.5%e
• (PL) Poland Mar Employment M/M: 0.2% v 0.1%e; Y/Y: 3.0% v 2.9%e
• (PL) Poland Mar Average Gross Wages M/M: 4.3% v 5.5%e; Y/Y: 5.7% v 7.3%e
• (IT) Italy Feb Current Account Balance: €3.3B v €0.0B prior
• (UK) Mar CPI M/M: 0.2% v 0.2%e; Y/Y: 1.9% v 2.0%e; CPI Core Y/Y: 1.8% v 1.9%e; CPIH Y/Y: 1.8% v 1.9%e
• (UK) Mar RPI M/M: 0.0% v 0.2%e; Y/Y: 2.4% v 2.6%e; RPI-X (Ex-mortgage interest payments) Y/Y: 2.4% v 2.6%e; Retail Price Index: 285.1 v 285.7e
• (UK) Mar PPI Input M/M: -0.2% v +0.3%e; Y/Y: 3.7% v 3.9%e
• (UK) Mar PPI Output M/M: 0.3% v 0.2%e; Y/Y: 2.4% v 2.1%e
• (UK) Mar PPI Output Core M/M: 0.0% v 0.1%e; Y/Y: 2.2% v 2.3%e
• (UK) Feb ONS House Price Index Y/Y: 0.6% v 1.2%e
• (EU) Euro Zone Mar Final CPI Y/Y: 1.4% v 1.4%e; CPI Core Y/Y: 0.8% v 0.8%e; CPI M/M: % v 1.0%e
• (EU) Euro Zone Feb Trade Balance (Seasonally Adj): €19.5B v €17.4B prior; Trade Balance NSA (unadj): €17.9B v €1.5B prior
• (IT) Italy Feb Total Trade Balance: €3.3B v €0.3B prior; Trade Balance EU: €1.1B v €0.9B prior

Fixed Income Issuance

• No seen

Looking Ahead

• 05:30 (DE) Germany to sell €1.0B in 2.5% July 2044 bunds
• 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 3-month and 12-month bills
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• 06:45 (US) Daily Libor Fixing
• 07:00 (RU) (RU) Russia to sell OFZ Bond
• 07:00 (BR) Brazil Apr IGP-M Inflation (2nd Preview): 0.6%e v 1.1% prior
• 07:00 (US) MBA Mortgage Applications w/e Apr 12th: No est v -5.6% prior
• 07:00 (ZA) South Africa Feb Retail Sales M/M: 0.3%e v 1.5% prior; Y/Y: 0.6%e v 1.2% prior
• 07:00 (UK) Weekly PM May question time in House of Commons (on break this week)
• 08:00 (UK) Baltic Bulk Index
• 08:30 (US) Feb Trade Balance: -$53.4Be v -$51.1B prior
• 08:30 (CA) Canada Feb Int'l Merchandise Trade (CAD): -3.3Be v -4.6B prior
• 08:30 (CA) Canada Mar CPI M/M: 0.7%e v 0.7% prior; Y/Y: 1.9%e v 1.5% prior; CPI Core- Median Y/Y: 1.8%e v 1.8% prior; CPI Core- Common Y/Y: 1.8%e v 1.8% prior; CPI Core- Trim Y/Y: 1.8%e v 1.9% prior
• 08:30 (CL) Chile Central Bank Traders Survey
• 09:00 (UK) BOE Gov Carney with ECB's Villeroy (France) in Paris
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-10 years)
• 10:00 (US) Feb Wholesale Inventories M/M: 0.3%e v 1.2% prior; Wholesale Trade Sales M/M: 0.3%e v 0.5% prior
• 10:30 (US) Weekly DOE Crude Oil Inventories
• 10:30 (DE) ECB's Lautenschaelger participates on panel
• 12:00 (CA) Canada to sell 10-year notes
• 12:30 (US) Fed's Harker (hawk, non-voter)
• 12:45 (US) Fed's Bullard (dove, voter) speaks at Hyman Minsky Conference
• 14:00 (US) Federal Reserve Beige Book
• (CO) Colombia Mar Consumer Confidence Index: No est v -5.6 prior
• 17:30 (US) New York Fed's Logan speaks at Money Marketeeers of New York

Germany's Economy Ministry lowered 2019 growth forecast to a mere 0.5%, just half of January's projection of 1.0% (downgraded from 1.8%).  If realized, that would be slowest growth in six years. For 2020m, growth is projected to pick up to 1.5%.

Economy Minister Peter Altmaier said externally, slowing global growth, trade tensions and Brexit uncertainty are weighing on the economy. Internally, introduction of the new car emission regulations and  unusually low Rhine water levels are negative factors.

The ministry also noted that global economy should regain some momentum ahead. Strong import would mean a negative contribution to growth in 2019, "purely mathematically".

Full release here.

Markets shrug off encouraging Chinese economic reports

It's been a sluggish start to the trading week, with there being no lack of market headlines but rather little movement on the back of it.

Take this morning for example. We were treated to a selection of expectation-beating economic reports from the world's second largest economy and investors simply shrugged it off like it does really matter. Except it very much does and a slowdown in China – which remains locked in a trade war with the US – has contributed to expectations of slower global growth this year.

I'm not one to get carried away with one batch of encouraging data and the longer term trend is very much against China, but these numbers may at least suggest all is not as bad as feared. And if a trade deal is struck in the coming months with the US, as many expect, perhaps things could even improve.

Oil buoyed by inventory and China data

The Chinese data may not have been the catalyst for the recent gains in oil prices – taking Brent to fresh five month highs and WTI just shy – but it may well be helping to sustain them. We haven't seen much of a corrective move since the rally on Tuesday which suggests there may be more to come.

A surprise drawdown in inventories gave oil prices a nice boost just as people appeared to be starting to question the sustainability of the rally. What may support this view is the fact that price has barely surpassed the previous peak in Brent and it's already stalled, while the momentum indicators aren't particularly supportive of the bullish case.

Gold moves below $1280

An interesting move in gold on Tuesday as it broke below $1,280 in what could be a very bearish development for the yellow metal. This has long been a key level of support for gold and some weakness in the dollar this morning isn't reviving it. That has been the case for some time that a rising dollar has an outsized impact on gold prices compared to when it declines, a key insight into sentiment towards it.

With price having finally broken below $1,280, a more significant decline could be on the cards. As yet, we haven't moved back above $1280 – in fact, it rebounded off this level early in European hours – which suggests this is no false breakout. That could bring $1,260 into focus as the next notable support, with $1,250 and $1,240 of interest below that.

Eurozone CPI was finalized at 1.4% yoy in March, unrevised, down from 1.5% yoy in February. Core CPI was finalized at 0.8% yoy, unchanged from February's reading. EU28 inflation was confirmed at 1.6% yoy.

The highest contribution to the annual euro area inflation rate came from energy (+0.52 percentage points, pp), followed by services (+0.51 pp), food, alcohol & tobacco (+0.34 pp) and non-energy industrial goods (+0.04 pp).

EUR/USD attempts to rally earlier today but fails to take out 1.1324 resistance. It's staying in range after the releases.

The single European currency depreciated about 45 base points against the Japanese Yen on Tuesday. The 50-hour simple moving average provided resistance for the currency pair during the previous trading session.

In regards to the nearest future, it is likely that the exchange rate will break the monthly resistance level at 126.69 and make a surge towards the upper boundary of a medium-term ascending channel pattern at 127.33.

However, if the monthly PP at 126.69 holds, the EUR/JPY currency exchange rate will aim for a support line set by the 200-hour SMA at 125.79 during the following trading session.

Upside risks have dominated the Australian Dollar versus the US Dollar since Tuesday's trading session. The currency pair gained about 0.90% in value during the last 24 hours.

The exchange rate breached the upper boundary of a long-term downtrend line at 0.7200 during the morning hours of today's trading session.

Given that a breakout had occurred, it is likely that the AUD/USD currency exchange rate will continue its upward momentum within this session. Bulls could push the pair towards the weekly R1 at 0.7215.

If the resistance level formed by the weekly R1 holds, the pair will make a brief retracement towards the 0.7180 mark.

Downside sentiment has prevailed in the market since the previous trading session. Thus, allowing the US Dollar to edged lower about 91 base points against the Canadian Dollar.

Everything being equal, most likely, the USD/CAD currency pair will continue its bearish momentum today. Bears could drag the exchange rate towards a support level formed by the weekly S1 at 1.3276 during the following session.

However, technical indicators flash strong buy signals on the 4(H) time-frame chart. Therefore, the monthly pivot point at 1.3317 could provide support for the currency exchange rate within this trading session.