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USD/JPY has posted losses on Thursday, erasing the gains recorded in the Wednesday session. In North American trade, the pair is trading at 113.60. In economic news, Japan's current account surplus dropped to JPY 1.73 trillion, shy of the estimate of JPY 1.75 trillion. In the US, PPI climbed to 0.5%, above the estimate of 0.2%. Unemployment claims ticked down to 236 thousand, below the forecast of 245 of thousand. On Friday, we could see further movement from USD/JPY, as the US releases retail sales, CPI and consumer confidence.

It's been a rough ride for the Japanese yen, which has managed just one winning daily session since April 25. The yen has reversed this trend on Thursday following the firing of FBI director James Comey. The ensuing crisis has hurt the US dollar as investors have flocked to the safe-haven Japanese yen. On Wednesday, the BoJ released its summary of opinions from its April policy meeting. BoJ board members recommended that the central bank maintain its ultra-loose accommodative policy due to global downside risks. At the same time, policymakers noted that the economy has improved, boosted by stronger exports and production. The summary stated that the BoJ should upgrade its economic assessment to state that the economy "has been turning towards a moderate expansion". On the inflation front, policymakers predicted that inflationary pressures would increase, but that the inflation target of 2 percent would not be attained before 2018. The summary reiterates the cautious optimism that characterized the BoJ rate statement in April – global demand has boosted the economy, but the BOJ feels that it's too early too make any changes to the current quantitative easing program.

Washington is gripped in a major political crisis, following Trump's firing of FBI director James Comey on Tuesday. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump's side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint an independent investigator into Trump's connections with Russia. Has Trump gone one step to far? This latest controversy shows no signs of fading away anytime soon, and could delay Trump agenda of tax reform and increased fiscal spending.

Headlines

European equity markets corrected lower today with the telecom sector underperforming. US stock markets opened around 0.25% in the red.

NY Fed Dudley said that the Fed will probably begin shrinking its balance sheet sometime later this year or in 2018 if economy stays on track. They will allow both MBS and Treasuries to run off. He added that there's no great urgency for the Fed to tighten aggressively though.

The BoE kept its policy unchanged with one member again voting in favour of an immediate rate hike. The BoE suggested interest rates could rise towards more normal levels over the next three years if Brexit negotiations go smoothly, but said it had been overoptimistic about economic performance for the first half of this year.

US shale oil output is growing at a faster than expected rate, keeping pressure on prices despite steep supply curbs from some of the world's biggest producers, Opec said in its monthly market report.

The European Commission revised upward its forecasts of euro zone economic growth this year and projected a lower unemployment rate, in new signs that the bloc's recovery is gathering pace. The 19-country currency bloc is expected to expand by 1.7% this year and 1.8% in 2018.

Banks' "unconstrained" ability to generate credit by pledging the same assets as collateral multiple times needs to be curbed or risks creating a new financial bubble, ECB vice president Constancio said. His remarks underscored the ECB's concerns about the prospect of a new boom in lending between financial firms

British industrial output shrank for a third month in a row in March (-0.5% M/M) underscoring how the impact of last year's Brexit vote has begun to weigh on the economy. The ONS also said Britain's trade deficit widened by more than expected, a further setback for hopes that sterling's fall would help rebalance the economy.

US weekly jobless claims stabilized around historical lows (236k) while markets expected a small setback to 245k. Continuing claims declined to a 28-yr low at 1918k. The bigger-than-forecast rebound in April producer prices indicates inflation pressures continue to build in the US economy and that March's decline was short-lived.

Rates

US Note future tests this week's low after strong data

Global core bonds continued to trade choppy. The Bund faced immediate selling pressure, but equity weakness came to the rescue and prevented losses. The EC only marginally upgraded its 2017 growth forecast, while keeping it unchanged in 2018 which avoid more ECB exit speculation. Heavyweight NY Fed governor Dudley suggested that the Fed will allow both MBS and US Treasuries to run-off, starting at the end of this year or the beginning of next. He added that there's no hurry to tighten policy though. His comments fell on deaf ears. US eco data, even if they were second-tier, managed to change the intraday tide. Weekly jobless claims remained near historically low levels while producer prices rose faster than forecast. US Treasuries recorded new intraday lows while German Bunds lost ground as well. Brent crude managed to hold above the key $50/barrel mark.

At the time of writing, the German yield curve bear steepens with yield 1 bp (2- yr) to 3.1 bps (30-yr) higher. Changes on the US yield curve range between +0.3 bps (10-yr) and +1.3 bps (30-yr). On intra-EMU bond markets, 10-yr yield spreads changes versus Germany range between -1 bps and +2 bps with Portugal (-3 bps) and Greece (-5 bps) outperforming.

The Italian debt agency tapped the on the run 3-yr BTP (€2.44B 0.35% Jun2020), 7-yr BTP (€2.25B 1.85% May2024), 30-yr BTP (€1.25B 2.7% Mar2047) and the off the run BTP (€1.25B 4.75% Sep2044). The combined amount sold (€7.19B) was near the upper end of the €5.5-7.25B target range. The auction bid cover was 1.51 which is rather strong for Italian standards. Tonight, the Treasury ends its refinancing operation with a $15B 30-yr Bond auction. Currently, the WI trades around 3.05%.

Currencies

Dollar maintains most of recent gains ahead of key data

Today, EUR/USD and USD/JPY initially drifted sideways. Both cross rates lost ground as equities finally fell prey to modest profit taking. The US eco data (PPI and claims) were better than expected. Core yields rose slightly, but were not able to trigger more USD gains. The focus for USD trading is on tomorrow's US CPI and retail sales. EUR/USD trades in the 1.0855/60 area. USD/JPY struggles not to fall below 114.

Overnight, most Asian equity indices gained ground with the Nikkei and the Korean indices at multi-month highs. Mainland China equities initially underperformed but staged a remarkable rebound towards the close. Until now the Chinese underperformance had little impact on other markets, but the issue deserves close monitory. USD/JPY (114.20) remained in risk-on modus, holding within reach of the recent highs. EUR/USD stabilized the 1.0865 area.

Early in Europe, there was again no clear directional momentum in European equities nor in EUR/USD and USD/JPY. The EU commission forecasts were revised only marginally higher and no market mover. At the onset of the US trading session, sentiment on risk gradually faltered. The correction weighed on EUR/JPY, EUR/USD and, to a lesser extent USD/JPY. The US PPI and jobless claims were stronger than expected and triggered some modest gains of the dollar against the euro. EUR/USD trades currently in the 1.0850/60 area. So, the price action in the cross rate was both due a pinch of risk-off and a small piece of USD strength. The US eco data also help to prevent a further USD/JPY decline. The pair stabilizes near 114. However, some further topping out might be on the cards if sentiment on risk would worsen more on China or for whatever other reason including simple profit taking.

Sterling ceding ground post-BoE decision.

Today, UK March production data and the trade balance were substantially weaker than expected. Sterling lost temporary ground upon their publication, but EUR/GBP drifted back to the low 0.84 area going into the BoE policy decision and inflation report. The Bank of England kept a balanced approach as it said that 'Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years'. The Bank indicated that an earlier rate hike might be needed in case of a smooth Brexit,. However, what are the chances for this scenario? The moves in sterling remained modest, but the market apparently concluded that the BoE will give slightly more weight to supporting growth rather than fighting inflation. The vote was again 7-1 for an unchanged decision. There was no additional support for a rate hike, what some apparently expected. EUR/GBP trades currently in the 0.8445/50 area. Cable is drifting further away from the 1.30 resistance and trades currently in the 1.2860 area.

Spot Gold is consolidating above fresh eight-week low at $1214, posted on Tuesday, but recovery action was so far limited and unable to stronger penetrate daily cloud and clear 100SMA to signal stronger rally (daily cloud base lies at $1222 and 100SMA at $1224). Gold received support from political situation in the USA after president Trump dismissed FBI chief, but rising hopes of Fed's interest rate hike in June keep gold's gains limited. However, stronger bounce could be expected on bullish signal from daily RSI/slow stochastic which are reversing from oversold territory. Close above 100SMA will be seen as bullish signal for extended recovery towards strong barriers at $1239/42 (daily cloud top / Tenkan-sen). Overall bearish structure keeps focus at the downside and looks for test of next target at $1210 (weekly cloud base), after current corrective phase is completed.

Res: 1225; 1228; 1236; 1242

Sup: 1222; 1216; 1214; 1210

Led by a rebound in services prices, the PPI for final demand increased 0.5 percent in April. Excluding food, energy and trade services, producer inflation is running at its fastest annual pace on record.

March Weakness "Transitory"

Proving March's modest decline was short-lived, PPI for final demand increased at a stronger-than-expected 0.5 percent in April. Price gains were broad based with solid increases in food (0.9 percent), energy (0.8 percent) and services (0.4 percent).

Ex-food, energy and trade services - our preferred measure of PPI - jumped 0.7 percent on the month and is rising at its fastest annual pace on record at 2.1 percent.

Pipeline Pressures Also Building

Prices for intermediate goods increased for the eighth consecutive month, up 0.5 percent, while unprocessed goods partially retraced March's decline, increasing 3.3 percent.

With gains broad based and annual rates in the headline and core measures standing at a series high, today's PPI report signals stronger inflation pressures at the start of Q2 and also keeps the Fed on track for a June interest rate hike.

US oil maintains firm near-term tone and probes above $48.00 barrier on extension of strong rally from Wednesday, sparked by stronger than expected fall in US crude inventories. Also, Saudi Arabia is going to reduce supplies to Asia for 7 million barrels in June, which additionally supported oil price recovery.

Today's break above important barrier at $47.56 (Fibo 38.2% of $53.74/$43.74 fall) generated additional bullish signal.

Fresh rally approached barrier at $48.33 (broken Fibo 23.6% of larger $26.04/$55.22 recovery leg) and may extend gains towards $48.74 (daily Kijun-sen) on renewed bullish sentiment.

However, recovery may face strong headwinds on bearish daily studies and 20/200SMA Death-cross that was formed at $49.26 and produces significant pressure.

In addition, slow stochastic is approaching overbought territory on daily chart and may signal limited upside.

To neutralize bearish threats, price needs to clear 200SMA ($49.26) and psychological $50.00 barrier, which lies near Fibo 61.8% of $53.74/$43.74 descend and is reinforced by falling 55SMA.

Broken 10SMA offers initial support at $47.32 (daily low) and near-term action is expected to remain bullishly aligned while the latter holds.

Res: 48.33; 48.74; 49.00; 49.26
Sup: 47.32; 46.96; 46.76; 46.00

Spot gold has seen a substantial 5% retracement since mid-April as it neared a significant resistance level at $1300.

The French election outcome has lifted markets' "risk-on" sentiment and resulted in safe heavens retreating which has weighed on gold prices.

The dollar has been strengthening over the past three days adding further downward pressure on the price of gold.

Spot gold hit a low of $1214.15 on Tuesday May 9th; a level last seen on March 15.

After reaching this low, gold prices rebounded and have consolidated; in part to the significant support zone between $1200 and $1210. The markets are looking for further upward movement from this zone.

On the 4-hourly chart, the price has been moving from the lower band to the middle band of the Bollinger Band indicator which suggests bearish momentum has been waning.

Be aware that the upside pressure is still heavy.

The resistance level is at 1225, followed by 1230 and 1235.

The support line is at 1220, followed by 1215 and 1210.

Keep an eye on the crucial US data for April, to be released at 13:30 BST on Friday May 12, including retail sales, core retail sales, CPI and core CPI. It will likely affect gold prices.

Daily Pivots: (S1) 1.0847; (P) 1.0873 (R1) 1.0892; More....

Intraday bias in EUR/USD stays on the downside at this point. With a short term top formed at 1.1020 on bearish divergence condition in 4 hour MACD, deeper decline should be seen to 55 day EMA (now at 1.0760) first. As noted before, rise from 1.0339 is seen as a corrective move. Break of 55 day EMA will affirm the case that such correction is completed and bring deeper decline to 1.0569 for confirmation. Above 1.1020 will extend such corrective rise instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate long term reversal.

Daily Pivots: (S1) 1.0059; (P) 1.0077; (R1) 1.0105; More.....

With 1.0048 minor support intact, intraday bias in USD/CHF remains on the upside for 1.0107 resistance next. As noted before, correction from 1.0342 should have completed at 0.9812. Break of 1.0107 should pave the way to retest 1.0342 high. On the downside, below 1.0048 minor support will turn bias neutral and bring consolidation first before staging another rise.

In the bigger picture, we're still maintaining that firm break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. However, the corrective nature of the fall from 1.0342 is starting to give the medium term outlook a bullish favor. Hence, in stead of looking for topping signal around 1.0342, we'd now pay closer attention to upside acceleration as USD/CHF approaches this level again.

Daily Pivots: (S1) 113.81; (P) 114.09; (R1) 114.56; More...

A temporary top is in place at 114.36 in USD/JPY and intraday bias is turned neutral. Some consolidations could be seen but downside of retreat should be contained by 112.08 support and bring another rally. Outlook remains unchanged that correction from 118.65 has completed with three waves down to 108.12. Above 114.36 will target 115.49 resistance first. Break will resume larger rally from 98.97 to 125.85 high.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Meanwhile, break of 115.49 resistance will extend the rise from 98.97 to retest 125.85. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

The Bank of England (BoE) has lowered its economic growth forecast for the UK to 1.9 percent, lower than February's prediction of 2.0 percent. The BoE says that the downgrade follows a slowing in consumer spending. Rising inflation and poor income growth were cited as the main reasons for consumers feeling the squeeze; reflected in disappointing retail sales data and a surprisingly steep drop in new car sales.

As was widely anticipated, interest rates remain at 0.25 percent.

David Johnson, Director at Halo Financial, comments, "While the latest Consumer Spending and Gross Domestic Product (GDP) data disappointed, recent Purchasing Managers' Index (PMI) results have, in contrast, looked very positive, providing some extra momentum for the Pound and balancing sentiment to some degree."

"In advance of today's "Super Thursday" announcements, Sterling was on the rise again, reaching rates against its major currency partners not seen for months and even years. The Pound was testing the EUR 1.20 level and the USD 1.30 level. However, immediately following today's release of BoE Monetary Policy Committee meeting minutes, Sterling fell against both the Euro and US Dollar from the highs seen early this morning; falling by 0.40 percent and 0.43 percent respectively."

He continues, "Despite all these key economic figures being released and the jumpiness of the Pound in response, we believe markets will continue to focus on the UK general election and the ongoing Brexit negotiations, which are likely to have a greater impact on Sterling than snapshot economic data and forecasts. Volatility and uncertainty will continue for the Pound in its major currency pairings. We are seeing that in movement across the Euro, US Dollar, and Australian Dollars, in particular."