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Dollar is mild pressure against European majors in early US session after weaker than expected growth data. Q1 GDP in US grew 0.7% annualized, sharply lower than prior quarter's 2.1% and missed expectation of 1.1%. While it's common to have a soft first quarter in recent years, the miss could prompt some adjustment in market's expectation on overall growth for the year. GDP price index, on the other hand, rose 2.3%, up from prior quarter's 2.1% and beat expectation of 2.0%. Employment cost index rose 0.8% in Q1, above expectation of 0.6%. While the greenback stays weak against European majors, in particular Sterling, it's showing some strength against Aussie and Yen and stays firm against Canadian Dollar.

Canadian Dollar stays soft too

Taking about Canada, GDP rose 0.0% mom in February, below expectation of 0.1% yoy and down from January's 0.6% yoy. IPPI rose 0.8% mom in March, above expectation of 0.3%. But RMPI dropped -1.6% mom, below expectation of -0.4%. The loonie is sold off deeply this week and pressured on two fronts. Firstly, there was talk that US would pull out from NAFTA. US President Donald Trump then backtracked and said he won't withdraw for the moment. This lifted some weight on the Canadian Dollar. Secondly, it's dragged down by the fall in oil price. WTI hit as low as 48.20 yesterday, comparing to this month's high at 53.76. While WTI is back above 49 for the moment, it's struggling to find sustainable buying to pull it back above 50 handle.

EC Tusk: People, Money and Irealand first before talks on post-Brexit

European Council President Donald Tusk urged that UK must settle the issues of "people, money and Ireland" before negotiation on future relationship with EU. And, UK must honour it's financial obligations to EU before starting talks on trade agreements. And future relations could only start once "we have achieved sufficient progress" on these key issues. And he emphasized that it's "not only a matter of tactics, but - given the limited time-frame we have to conclude the talks - it is the only possible approach". German Chancellor Angel Merkel also insisted that "without progress on the many open questions of the exit, including the financial questions, it makes no sense to have parallel negotiations."

Released from UK, Q1 GDP grew 0.3% qoq, below expectation of 0.4% qoq, and down from prior quarter's 0.7% qoq. Index of services rose 0.5% 3mo3m in February, in line with consensus. BBA mortgage approvals dropped to 41.1k in March. Sterling is so far immune from bad economic data.

Eurozone inflation surged

From Eurozone, CPI surged to 1.9% yoy in April, up from prior month's 1.5% yoy and expectation of 1.8% yoy. Core CPI also jumped sharply to 1.2% yoy, up from 0.7% yoy and beat expectation of 1.0% yoy. Eurozone M3 money supply rose 5.3% yoy in March. Germany retail sales rose 0.1% mom in March, import price index dropped -0.5% mom. French GDP rose 0.3% qoq in Q1, below expectation of 0.4% qoq. Also from Europe, Swiss KOF leading indicator dropped to 106 in April.

Released from Japan, National CPI core was unchanged at 0.2% yoy in March. But Tokyo CPI core improved to -0.1% yoy in April. Retail sales rose 2.1 yoy in March. Household spending dropped -1.3%. Unemployment rate was unchanged at 2.8%. Industrial production dropped -2.1% mom. From Australia, PPI rose 0.5% qoq in Q1. New Zealand trade balance turned to NZD 332m surplus in March, building permits dropped -1.8% mom.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2855; (P) 1.2885; (R1) 1.2933; More...

Intraday bias in GBP/USD remains on the upside and current rise from 1.2108 should target 161.8% projection of 1.2108 to 1.2614 from 1.2365 at 1.3184. At this point, price actions from 1.1946 are still interpreted as a correction pattern. Therefore, we'd expect strong resistance below 1.3444 to bring larger down trend resumption. On the downside, break of 1.2755 minor support will turn bias to the downside. Further break of 1.2614 resistance turned support will now indicate near term reversal.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Economic Indicators Update

The Greenback was vulnerable to heavy losses on Friday, with prices tumbling towards 98.80 as the mixture of soft economic data from the US this week, and rising uncertainty over Trump's proposed tax reforms weighed on sentiment.

Much attention may be directed towards the pending Q1 2017 US GDP report that is being released later today and is widely expected to display a slowdown in economic momentum as accelerating inflation pressured consumer spending.

With a potential slowdown in first quarter US economic growth this year weighing on expectations of the Fed raising interest rates in June, the Dollar may be at threat of further depreciation. From a technical standpoint, the Dollar Index is heavily depressed on the daily charts. Persistent weakness below 98.80 could encourage a further decline towards 97.50.

Commodity spotlight – WTI Crude

Oil markets remain entangled in a fierce tug of war, with oversupply concerns and optimism over OPEC stabilizing the saturated markets. Although WTI Crude staged an impressive rebound during early trading on Friday amid a potential OPEC cut extension, the recent reports of Libya's biggest oil field reopening may compound oversupply fears, consequently capping upside gains.

The live threat of US Shale's incessant pumping undermining the OPEC production cut extension may expose oil prices to steeper losses. From a technical standpoint, WTI Crude remains bearish on the daily charts with bears potentially exploiting the technical bounce to drag prices lower. Previous support at $50 could transform into a solid resistance that opens a path towards $47.50. In an alternative scenario, a breakdown below $49.00 may open a similar route to $47.50.

• Sterling continues to strengthen in spite of election polls
• USD weaker as Trump tears through proposals
• CAD hit by US timber and NAFTA announcements

All eyes were on America as Donald Trump said he will renegotiate the North America Free Trade Agreement (NAFTA) or terminate it, but the agreement is safe for now. The US President also warned that "There is a chance that we could end up having a major, major conflict with North Korea," although he did say he would prefer to resolve the tension through diplomatic means. He went on to say he would like to scrap the 'Horrible Horrible', South Korean trade deal. I heard the president's first 100 days in office described as the 'Bonfire of the insanities' and his keenness to stir things up does kind of fit that moniker. The US Dollar is continuing to weaken ahead of this afternoon's Gross Domestic Product data. A sharp slowdown is forecast, so beware the USD.

As you might imagine, the Canadian Dollar weakened further on that announcement and GBP-CAD is pushing up to levels we haven't seen since before the Brexit vote. This recent announcement adds to concerns over US timber levies, which would severely damage Canada's exports to their southern neighbour. C$1.75 was a level at which GBP buyers filled their boots in the second half of 2014 and it proved an immovable object when the Pound bounced back after the Brexit vote. Sterling has pushed through that and is testing just below 1.77 right now. If that retracement level breaks, 1.83 is a distinct likelihood. This afternoon brings Canadian economic growth data and the forecasts are very mixed. Be ready for GBP-CAD volatility at 12.30 GMT.

In fact, the Pound is testing a number of significant technical levels as it strengthens. AUD 1.73 is significant, Sterling is pushing towards NZD 1.90 and is threatening to test USD 1.30. All are levels that mark a change of trading ranges and the Pound is battering at the doors of all. If this morning's preliminary GDP data for the UK is as bullish as some have suggested, the Pound could well flex its muscles again at the end of this week and this month.

The weakness in the NZD comes in spite of an upbeat business confidence report released overnight. A net 11% of businesses see positive activity ahead and that is in line with last month's report. The fact that businesses are still looking to recruit and invest is good news for the Reserve Bank of New Zealand (RBNZ) but probably won't cause a knee jerk rate hike at this stage.

Monday is a public holiday in many countries. In fact, Denmark is the only major European Market that will be open on the day. So, volatility is a very likely scenario. There are cost-free ways and means to take advantage of that and to protect yourself against the worst the market can throw at you. Have a word with your Halo Financial contact to find out how that could work for you.

Meanwhile, have a lovely long weekend.

Lecture

As he was walking unsteadily along at 3am, a very drunk man was stopped by a police officer.

"What are you doing out here at 3am?" said the officer.

"I'm on my way to a lecture about the evils of alcohol and the damage it does to a person's internal organs and to their family," said the man.

And who is giving a lecture like that in the middle of the night?" asked the copper.

"My wife!!!" said the man.

As inflation numbers fail to impress in Japan, along with contracting household spending, unemployment numbers do improve, but this could all be symptomatic of a nation in population decline and a shrinking labour force. On the other hand, USD data was largely negative this week, but safe haven flows failed to make the JPY stronger than USD. In my opinion, with Macron likely to win the French Presidential elections, its likely to see a risk-on environment continue, and you should be going long on the dips on this pair.

Technically, we see a bullish Wolfe Wave structure on USD/JPY where target for this move is 111.55. When 1-4 line is hit (target line) we should either see a breakout or rejection. Breakout above 111.55 should target 111.80 zone. However a rejection from 111.55 could drop the pair to POC zone 110.75-90 where new wave of buyers could appear targeting 111.50 and 111.80 again.

Global equities are on the back foot; trimming their sixth consecutive monthly gain, as geopolitical worries intensifies ahead of today's U.S GDP report for Q1 (08:30 am).

U.S data is projected to show the domestic economy expanded at a +1.0% annualized rate in Q1, the weakest pace in a year.

Crude prices are again trading in the black, after tumbling on concern over a supply glut. The EUR is heading for a weekly gain, reclaiming most of yesterday's losses that came after the ECB signalled its commitment to stimulus even as the region's economy growth firms.

And in the U.S, congress is considering a continuing resolution to avoid a government shutdown.

1. Stocks trim monthly gains

Despite the North Korea situation, global stocks remain near a record high as investors bet on improving global economic growth and stronger earnings.

In Japan, the Nikkei share average ticked down -0.3% overnight as a relief rally driven by fading Euro political worries faded. Despite this, the benchmark still managed to print its largest weekly gain in five months. The broader Topix fell -0.3% – the gauge gained +2.9% this week, the best performance this year.

In South Korea, the Kospi slipped -0.2% from its highest level in six-years, while in Hong Kong, the Hang Seng dropped -0.4%, and the Shanghai Composite Index added +0.1% – the latter gauge is down -2.1% this month.

In Europe, equity indices are trading generally lower as market participants digest comments by ECB's Draghi that there is not enough evidence to change the inflation outlook. Financials are mixed in the Eurostoxx, while commodity and mining stocks are providing some support in the FTSE 100.

U.S stocks are set to open flat.

Indices: Stoxx50 flat at 3,562, FTSE -0.2% at 7,222, DAX flat at 12,445, CAC-40 +0.1% at 5,275, IBEX-35 +0.1% at 10,696, FTSE MIB +0.2% at 20,647, SMI -0.1% at 8,836, S&P 500 Futures flat.

2. Oil rebounds from one-month low on hopes for output cut extension

Oil prices have rebounded overnight after dropping to a one-month low yesterday. The ‘bulls' continue to buy product on dips believing that at next months OPEC meeting global producers will extend their output cuts for H2.

Crude prices are also getting some help from a weaker dollar and signs that non-OPEC member Russia was fully compliant with output limits agreed back in November.

Brent crude futures are trading up +33c at +$51.77 a barrel, while U.S light crude (WTI) is up +44c at +$49.41 a barrel.

The supply overhang is in part due to surging U.S production from shale producers – EIA data indicates that domestic output production has risen +10% since mid-2016 to +9.27m bpd.

Gold is little changed ahead of the U.S open. Nevertheless, it's poised for the biggest weekly fall in nearly two-months as investors seek out higher returns. Spot gold is up +0.1% at +$1,264.86 per ounce.

Note: Gold is on track for a weekly drop of about -1.5%, the biggest weekly percentage fall since the week of March 10, but is heading towards a gain of about +1.3% for the month.

3. Yields remain contained

U.S 10-year yields closed out below +2.30% yesterday as a drop in oil to one month lows supported prices – lower energy prices tend to keep inflation intact.

Bonds have also found support from continuing scepticism over the prospects for U.S fiscal stimulus, as well as month-end demand as some investors adjusted their portfolios to match changing indexes.

Elsewhere, yesterday the ECB kept its main interest rate charged on regular loans at +0% while the rate on overnight deposits would stay at a -0.4%. It also maintained its bond-buying program (QE) at +€60B a month. Dealers are beginning to price in ECB tapering happening in early 2018. Euro inflation numbers this morning (see below) has backed up yields on 10-year German Bunds by +4 bps to +0.34%.

Down-under, Aussie benchmark 10-year yields lost -4 bps to +2.58%.

4. May Day Squaring

End-of-month and upcoming May-Day holiday on Monday is keeping FX flows at a minimum, but the USD is a tad softer ahead of the U.S open.

EUR/USD (€1.0936) is slightly higher; trading atop of this months high supported by this morning Eurozone data – April core-CPI finally broke out of its year-long trading range of +0.7-0.8% to surge to +1.2%

The pound is trading atop of its eight-month highs (£1.2945) and is threatening to test that psychological £1.3000 handle despite this morning disappointing data print – U.K Q1 Advance GDP data came in slightly below expectations (see below).

In Japan, a barrage of data overnight has failed to move the JPY currency much. USD/JPY is steady trading at ¥111.46 area in the session.

Expect dealers to take their cue from this morning U.S Advanced GDP headline print.

5. U.K data disappoints, Japan's mixed, and E.U has inflation

The U.K. economy slowed sharply in Q1 as rising inflation-crimped consumer spending. The economy grew +0.3% on the quarter, as a weakness in services more than offset a strong quarter for manufacturing. Analysts expect business investment and exports will need to do more of the heavy lifting in the months ahead to sustain growth.

In Japan a barrage of economic releases pointed towards economic growth, but with soft inflation- national CPI slowed to a five-month low (+0.2% vs. +0.3%e), while industrial output decline was the biggest in nine-months (-2.1% vs. -0.8%e m/m). The number for unemployment was better than expected (+2.8% vs. +2.9%), while retail trade reached a two-year high.

Finally, in Europe, the Eurozone CPI (+1.2% vs. +1%) was higher than expected as core inflation broke out of recent 12-month range. The headline inflation reached +1.9%, touching the ECB's target for close to, but slightly below +2%.

'There's enough from today to suggest that we might see a material change in policy in June. But no one should get ahead of themselves. There's clearly not enough consensus on the Governing Council.' - James Athey, Aberdeen Asset Management

As markets expected, the European Central Bank left its monetary policy unchanged at its meeting on Thursday as inflation remained below its 2% target. Although, the ECB acknowledged strong economic growth, with the economy showing the best growth rate since the global financial crisis. Nevertheless, the Central bank said that further rate cuts and an increase in asset purchases remained on the table despite Germany's calls for a stimulus reduction. The ECB President Mario Draghi stated that last month's data confirmed the view that the economy was in a good shape and downside risks continued to fall over the past several months. However, Draghi noted that underlying inflation growth remained subdued, driven by temporary factors, such as the change in crude oil prices. Therefore, policymakers voted to keep the Bank's main refinancing rate at 0.00%, the deposit rate at -0.4% and the pace of monthly asset purchases at 60B euros. Nevertheless, some analysts assumed that if Emmanuel Macron wins the final round of the French Presidential Election and the Euro zone's economy maintains a moderate yet stable pace of growth the ECB would likely reduce some of its stimulus at its next meeting in June. Furthermore, Draghi highlighted that deflation risks the risks of deflation 'largely disappeared''.

'Business investment appears to have some better momentum early in 2017 and, while growth is far from hot, we appear to be transitioning away from the declines that plagued much of 2016.' - Robert Kavcic, BMO Capital Markets

Orders for US-manufactured goods rose less than experts estimated in March, official figures revealed on Thursday. The US Department of Commerce reported that orders for durable goods in March soared only 0.7%, following the previous month's increase of 1.8%. Excluding transportation items, orders for core durable goods plunged 0.2%, while analysts anticipated 0.4% growth. This negative figure represented the first decline since June 2016. The main cause of March's drop was associated with weaker demand for automobiles, fabricated metal products and machinery. Namely, the number of orders for motor vehicles tumbled 0.8%, the slowest rate of growth in the last 25 months. At the same time, orders for fabricated metal products slipped 0.8%, whereas machinery orders fell 0.2%. In contrast, bookings in the civil aircraft sector jumped 7%. Furthermore, the number of orders for defence equipment advanced 12%. According to analysts, the slowdown at the end of the Q1 was mainly driven by the strong US Dollar, struggles in the energy sector and the weather-related factors. Nevertheless, they believe that businesses are going to increase their capital expenditures in the near future amid the US President Donald Trump's announced tax reform.

Currency pair EUR/USD

The EUR/could be building a head and shoulders reversal chart pattern (purple boxes), which would be confirmed once price breaks below the support trend line (blue). A bullish break above resistance (red) would invalidate the pattern and could indicate a potential uptrend continuation towards the 78.6% Fibonacci level of wave 2 (green).

The EUR/USD has not managed to break the top as expected yesterday. This could be explained by a potential 123 (red) or ABC (orange) correction. A break below support (blue) could start the bearish continuation towards the Fibonacci targets.

Currency pair GBP/USD

The GBP/USD is challenging the resistance level (red) of the sideways zone (red/blue). A bullish break could see price challenge the round level of 1.30.

The GBP/USD is forming an ascending wedge chart pattern which is indicated by support (green) and resistance (red/orange). A break above the resistance could see price move up towards the Fibonacci targets of wave 5 (purple).

Currency pair USD/JPY

The USD/JPY seems to have completed a wave 3 (brown) and is now be building a potential wave 4 (brown) retracement if price stops at one of the shallow Fibonacci levels (23.6-50%).

The USD/JPY is building a contracting triangle (red/green) chart pattern. A break below the support trend line (green) could see a larger retracement unfold towards the Fib levels of wave 4 (brown).

Notes/Observations

Japan barrage of economic releases pointed towards economic growth but with soft inflation

UK GDP YoY registered a slight miss but bounces off 4-year lows

Euro Zone inflation higher than expected; Core inflation breaks out of recent 1-year range; Headline CPI back at ECB target

Focus turns to US Q1 Advance GDP reading

Overnight:

Asia:

Japan Mar Jobless Rate 2.8% v 2.9%e (matches lowest rate since Jun 1994); Job to applicant: 1.45 v 1.43e (highest since November 1990)

Japan Mar National CPI falls to a 5-month low (Y/Y: 0.2% v 0.3%e); CPI Ex Food, Energy (core-core) registers its first decline since July 2013 (Y/Y: -0.1% v 0.0%e)

Japan Mar Overall Household Spending misses (Y/Y: -1.3% v -0.5%e)

Japan Mar Preliminary Industrial Production MoM reading registers its biggest decline since June of 2016 (MoM: -2.1% v -0.8%e

Europe:

UK Apr GFK Consumer Confidence hits a 4-month los (-7 v -7e) - UK drawing up post-Brexit laws that will allow it to continue imposing sanctions on foreign countries

EU leaders said to be preparing to recognize the "potential for a united Ireland" within the EU. Northern Ireland would seamlessly re-join bloc after Brexit in event of a vote for Irish reunification

Americas:

House Republican leaders said to have delayed a vote on Obamacare replacement bill until next week at earliest due to lack of support. At least 15 House Republicans remain solidly opposed to a revised leadership plan with another 20 leaning towards ‘no' or are still undecided

President Trump: North Korea is my biggest worry; Would love to resolve situation diplomatically, but its "very difficult". There is a chance that we could end up having a major, major conflict with North Korea. Absolutely

Economic Data

(FR) France Q1 Advance GDP Q/Q: 0.3% v 0.4%e; Y/Y: 0.8% v 0.9%e

(DE) Germany Mar Retail Sales M/M: 0.1% v 0.0%e; Y/Y: 2.3% v 2.2%e

(DE) Germany Mar Import Price Index M/M: -0.5% v -0.1%e; Y/Y: 6.1% v 6.5%e

(UK) Apr Nationwide House Prices M/M: -0.4% v +0.1%e; Y/Y: 2.6% v 3.3%e

(FR) France Apr Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e

(FR) France Apr Preliminary CPI EU Harmonized M/M: 0.1% v 0.1%e ; Y/Y: 1.2% v 1.4%e

(FR) France Mar Consumer Spending M/M: -0.4% v +0.5%e; Y/Y: -1.0% v +0.9%e

(ES) Spain Q1 Preliminary GDP Q/Q: 0.8% v 0.7%e; Y/Y: 3.0% v 2.9%e

(CH) Swiss Apr KOF Leading Indicator: 106.0 v 107.5e

(AT) Austria Q1 Preliminary GDP Q/Q: 0.5% v 0.6% prior; Y/Y: 2.0% v 1.7% prior

(TR) Turkey Mar Trade Balance: -$4.5B v -$4.5Be

(HU) Hungary Mar Unemployment Rate: 4.5% v 4.5%e

(EU) Euro Zone Mar M3 Money Supply Y/Y: 5.3% v 4.7%e

(NO) Norway Apr Unemployment Rate: 2.8% v 2.8%e

(UK) Q1 Advance GDP Q/Q: 0.3% v 0.4%e; Y/Y: 2.1% v 2.2%e

(UK) Mar BBA Loans for House Purchase: 41.1K v 42.0Ke

(EU) Euro Zone Apr Advance CPI Estimate Y/Y: 1.9% v 1.8%e; CPI Core Y/Y: 1.2% v 1.0%e

(IT) Italy Apr Preliminary CPI (including Tobacco) M/M: 0.3% v 0.2%e; Y/Y: 1.8% v 1.6%e

(IT) Italy Apr Preliminary CPI EU Harmonzied M/M: 0.8% v 0.5%e; Y/Y: 2.0% v 1.6%e

Fixed Income Issuance:

(IN) India sold total INR150B vs. INR150B indicated in 2022, 2026, 2034 and 2046 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 flat at 3,562, FTSE -0.2% at 7,222, DAX flat at 12,445, CAC-40 +0.1% at 5,275, IBEX-35 +0.1% at 10,696, FTSE MIB +0.2% at 20,647, SMI -0.1% at 8,836, S&P 500 Futures flat]

Market Focal Points/Key Themes: European equity indices have been trading generally lower in the morning session but currently mixed as market participants digest comments by ECB's Draghi that there isn't enough evidence to change the inflation outlook; banking stocks mixed in the Eurostoxx with shares of Nokia leading the gains in the index in continuation from yesterday's rally after releasing its Q1 results; shares of Barclays trading notably lower in the FTSE 100 after releasing Q1 results; commodity and mining stocks providing some support in the index as copper prices trade higher intraday; Asian markets generally ending lower but mixed overnight.

A plethora of upcoming scheduled US earnings (pre-market) include Aaron's Adient, AGCO, Autoliv, Apollo Global Management, AVX, Barnes Group, Franklin Resources, Colgate-Palmolive, Cabot Oil & Gas, Calpine, Chevron, General Motors, Group 1 Automotive, Goodyear Tire & Rubber, Hill-Rom, Host Hotels & Resorts, IDEXX Labs, KBR, LifePoint Health, LyondellBassell, Moog, Materion, Public Service Enterprise, Portland General Electric, Phillips 66, Royal Caribbean Cruises, Roper Technologies, SAIA, Spirit Airlines, Synchrony Financial, Thomson Reuters, VF Vorp, Ventas, Exxon Mobil, and Olympic Steel.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Continental CON.DE +1.0% (prelim Q1 results)]

Energy: [Fuchs Petrolub FPE.DE -1.9% (Q1 results), Norsk Hydro NHY.NO -6.8% (Q1 results)]

Financials: [Barclays BARC.UK -4.2% (Q1 results), Bankia BKIA.ES -1.1% (Q1 results), CaixaBank CABK.ES +1.6% (Q1 results), Danske Bank DANSKE.DK +0.9% (Q1 results), DNB NOR ASA DNB.NO +0.6% (Q1 results), Royal Bank of Scotland RBS.UK +2.0% (Q1 results), UBS UBSN.CH +3.3% (Q1 results)]

Healthcare: [Sanofi-Aventis SAN.FR +1.7% (Q1 results)]

Industrials: [Electrolux ELUXB.SE +3.6% (Q1 results), Linde LIN.DE -1.6% (Q1 results), MTU Aero MTX.DE +2.6% (Q1 results), Zodiac Aerospace ZC.FR +3.7% (H1 results)]

Technology: [Gemalto GTO.FR -11.6% (Q1 sales), Rexel RXL.FR -3.6% (Q1 results)]

Speakers

SNB's Jordan reiterated view that loose monetary policy was appropriate given the low inflation and that SNB could again cut rates and step up intervention if needed

Turkey Central Bank (CBRT) Quarterly Inflation Report reiterated to keep monetary policy tight until inflation outlook improved and could do extra tightening if necessary. Inflation was expected to fall in coming months. Gradual recovery trend observed in Turkey. TRY currency (Lira) volatility has decreased

China Academy of Social Sciences (CASS): China 2017 GDP growth expected at 6.6%; trade surplus at $303B

South Korea Foreign Ministry: No request from US on THAAD payment; No changes in its operational cost issue

China Foreign Ministry: Will not comment on what China will do if North Korea carried out another nuclear test

Russia Oil Min Novak: Have reached the planned pledged under OPEC cooperation agreement of reducing production by 300K bpd

Currencies

End-of-month and upcoming May-Day holiday kept FX flows at a minimum but the USD was a touch softer as the NY morning approached

EUR/USD was slightly higher but holding below the 1.09 level for the bulk of the morning but the pair surged higher after Apr Core CPI finally broke out of its year-long trading range of 0.7-0.8% to surge to 1.2%

GBP/USD was near 7-month highs ahead of the UK Q1 Advance GDP data but was little changed after the data came in slightly below expectations.

A data barrage of Japanese data failed to move the JPY currency much. USD/JPY was steady at 111.30 area in the session.

Fixed Income

Bund futures trade at 161.42 down down 59 ticks retracing from highs seen yesterday following the ECB rate decision and stronger then expected inflation data out of Europe which has put further pressure on futures. A continued move lower targets 161.07 then 160.65 low. Resistance moves to yesterday high of 162.15 with eventual target of 162.52 gap fill.

Gilt futures trade at 128.12 down 34 ticks, despite slightly weaker Q1 GDP data. Continuation to the downward trend eyes 127.94 followed by 127.74. Resistance stands at 128.58 then 128.81 followed by 129.14. Short Sterling futures trade flat to down 1bp with Jun17Jun18 steepening to 13.0bp.

Friday's liquidity report showed Thursday's excess liquidity fell to €1.587T a fall of €21B from €1.608T prior. Use of the marginal lending facility fell to €259M from €313M prior.

Corporate issuance saw activity pick up with $12.4B coming to market via 7 issuers, with American Express 3 part $4B offering, PepsiCo $3B 5 part offering and Dupont $2B offering accounting for the bulk of the issuance. This put issuance for the week at $24.5B. With no deals expected today, Issuance for the month of April stands just above $80B. For the week ending April 26th Lipper US fund flows reported IG funds net inflows $4.70B bringing YTD inflows to $48.04B, High yield funds reported inflows of $290.7M bringing YTD outflows to $3.98B.

Looking Ahead

05:30 (SL) Sri Lanka Apr CPI Y/Y: No est v 7.3% prior

06:00 (PT) Portugal Mar Retail Sales M/M: No est v 3.1% prior; Y/Y: No est v 1.9% prior

06:00 (PT) Portugal Mar Industrial Production M/M: No est v -0.7% prior; Y/Y: No est v 2.1% prior

06:00 (IT) Italy Mar PPI M/M: No est v 0.3% prior; Y/Y: No est v 3.7% prior

06:00 (IE) Ireland Mar Retail sales Volume M/M: No est v -0.5% prior; Y/Y: No est v 1.1% prior

06:00 (UK) DMO to sell combined £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively)

06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 7-day Auction Rate by 25bps to 9.50%

06:45 (US) Daily Libor Fixing - 07:30 (IN) India Weekly Forex Reserves

08:00 (ZA) South Africa Mar Trade Balance (ZAR): 6.2Be v 5.2B prior

08:00 (ZA) South Africa Mar Budget Balance (ZAR): No est v 13.8B prior

08:00 (PL) Poland Apr Preliminary CPI M/M: +0.3%e v -0.1% prior; Y/Y: 2.0%e v 2.0% prior

08:00 (BR) Brazil Mar National Unemployment Rate: 13.7%e v 13.2% prior

08:00 (CL) Chile Mar Total Copper Production: No est v 377.0K prior

08:00 (CL) Chile Mar Unemployment Rate: 6.6%e v 6.4% prior

08:00 (CL) Chile Mar Manufacturing Production Y/Y: -1.5%e v -1.0% prior, Industrial Production Y/Y: -6.3%e v -7.6% prior

08:00 (ES) Spain Debt Agency (Tesoro) announces specific bonds to be issued in next week auction

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Q1 Advance GDP Annualized Q/Q: 1.0%e v 2.1% prior; Personal Consumption: 0.9%e v 3.5% prior

08:30 (US) Q1 Advance GDP Price Index: 2.0%e v2.1% prior; Core PCE Q/Q: 2.0%e v 1.3% prior

08:30 (US) Q1 Employment Cost Index (ECI): 0.6%e v 0.5% prior

08:30 (CA) Canada Feb GDP M/M: 0.1%e v 0.6% prior; Y/Y: 2.6%e v 2.3% prior

08:30 (CA) Canada Mar Industrial Product Price M/M: 0.3%e v 0.1% prior; Raw Materials Price Index M/M: -0.5%e v +1.2% prior

09:00 (BE) Belgium Q1 Preliminary GDP Q/Q: No est v 0.5% prior; Y/Y: No est v 1.2% prior

09:00 (MX) Mexico Q1 Preliminary GDP Q/Q: 0.5%e v 0.7% prior; Y/Y: 2.5%e v 2.4% prior

09:30 (BR) Brazil Mar Nominal Budget Balance (BRL): -34.6Be v -54.2 prior; Primary Budget Balance: -11.3Be v -23.5B prior

09:45 (US) Apr Chicago Purchasing Manager: 56.4e v 57.7 prior

10:00 (MX) Mexico Mar Net Outstanding Loans (MXN): No est v 3.63T prior

10:00 (US) Apr Final Michigan Confidence: 98.0e v 98.0 prelim

11:00 (CO) Colombia Mar Urban Unemployment Rate: 10.6%e v 11.0% prior; National Unemployment Rate: No est v 10.5% prior

11:00 (EU) Potential sovereign ratings:

(DE) Germany Sovereign Debt to be rated by S&P

(UK) United Kingdom Sovereign Debt to be rated by S&P

(NL) Netherlands Sovereign Debt to be rated by Fitch

(UR) Ukraine Sovereign Debt to be rated by Fitch

13:00 (US) Weekly Baker Hughes Rig Count data

14:30 (US) Fed's Harker speaks in Washington

15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 25bps to 6.75%

(CO) Colombia Mar Industrial Confidence: No est v -0.1 prior; Retail Confidence: No est v 23.2 prior

(MX) Mexico Mar YTD Budget Balance (MXN): No est v -31.5B prior Weekend

(DE) FDP Holds 2-day Election-Year Party Convention in Berlin

The end of the month is turning into a tough one for GBP naysayers as cable sales higher. Meanwhile, Draghi drags Euro lower, and Trump threatens to terminate, again.

Month end flows should always be taken with a grain of salt, as institutions rebalance international portfolios or do last minute hedging etc. These execute at best once a month flows may or may not fit in with the general theme of the week or month, especially ahead of an almost global long weekend.We can also expect to see a lot of large options expiries and that dirtiest of words, 'fixings', throughout the London and New York sessions.

Month end noise aside and somewhat belying the timid ranges we have seen in the G-10 universe over the last 12 hours quite a lot is actually going on. Setting the scene nicely for a rather more frisky FX market next week with the FOMC and Non-Farms on Friday.

GBP continued to rule the waves, moving higher against the USD and the EUR. We will look at this in a bit more detail later but needless to say, it still feels as if some structural shorts are yet to be unwound.

President Trump set a few cats among the pigeons this morning by threatening to either renegotiate or terminate South Korea's trade deal with the U.S. and in a Mexico moment, handing the South Korean armed forces a $1 billion bill for the installation of their THAAD system around Seoul.

The two interesting things that came out of this were that a. Neither the Kospi nor the Korean Won reacted at all to the statement, suggesting that the President's modus operandi with regards to negotiations is starting to fall on deaf ears globally. The carrot and the stick approach is refreshing, it is just not very subtle.

Secondly, in an equally Mexican response, the South Korean Defence Ministry said they had absolutely no intention of paying for it and the greenback started weakening.

EUR/USD

Starting with the ECB overnight, Mr Draghi has most certainly caused a drag on Euro with some decidedly dovish comments overnight.

'We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook - which remains conditional on a very substantial degree of monetary accommodation.'

'Interest rates will 'remain at present or lower levels for an extended period of time, and well past the horizon' of asset purchases.'

source: Bloomberg

This saw EUR/USD drift lower by over nearly a 100 points in yesterday's session although Mr Trumps terminating comments have seen the single currency make some ground back. The Euro is delicately poised on the charts as we head into the long weekend, sitting midrange at 1.0895.

As highlighted by the yellow circle, the EUR has formed a double top at 1.0950 and has made a series of lower highs since the start of the week. This becomes the closest major resistance.

Support is denoted by a clear double bottom at 1.0850 with the 200-day moving average (DMA) just below there at 1.0841. A close below here could set the EUR up for a correction to fill its Monday gap to 1.0730 early next week. Longer term trendline support and the 100-DMA lie below in the 1.0640/50 area.

GBP/USD

Her Majesty's British Pound has enjoyed an excellent week. Consolidating its gains post the snap election announcement and on the charts looking like it may be getting ready to move higher. U.K GDP has just come out.

16:30 *(UK) Q1 ADVANCE GDP Q/Q: 0.3% V 0.4%E; Y/Y: 2.1% V 2.2%E – Source TradeTheNews.com

Interestingly the slight miss has had a zero effect on the GBP, in contrast to the effects a miss on any data from the U.K. would have had a few weeks ago. Polls are showing the Tories will win over 50% of the vote if the election were to happen today must be having some effect. However, I suspect this has more to do with the amount of structural longer term shorts that are out there in GBP generally and I suspect the break though 1.2800 made some palms sweaty. A break of 1.3000 could see an all out anxiety attack amongst GBP bears.

The chart below shows the GBP bullish consolidation in stark detail. Looking at the technicals, GBP has broken through resistance at 1.2917 with the next resistance at 1.30000 more psychological than scientific. A daily close above this level could imply a larger move to the 1.3400 area.

Support is initially at 1.2917 followed by 1.2750 and the 1.2600 area. A series of previous daily highs and the 200-DMA.

EUR/GBP

In the big picture, EUR/GBP is still in its broad post-Brexit consolidation range of 8300/8850. More importantly, the GBP rally has seen the Monday morning election gap filled on the charts. However, it is important to note the gap has been filled by the GBP rallying, not the EUR dropping. With this gap out of the way, we can ponder the EUR/GBP chart from a more unbiased perspective.

We are trading nearer to the lower end of the longer term range, but it is not yet clear that we will move through the bottom. A break in GBP/USD above 1.3000 and a drop in EUR/USD to 1.0730 could change that dynamic.

In the meantime, EUR/GBP has resistance at 8530 followed by the 100 and 200 DMA's at 8550 and 8595. Support is nearer, at 8410 with the key level of 8300 behind that.

Summary

We appear to be at some interesting inflexion points with EUR and GBP as the month draws to an end. From a macro perspective, it appears that Sterling's Brexit day of reckoning will not be coming as soon as many longer term structural bears would want. From a technical perspective, GBP is looking constructive against both the USD and EUR. The Euro itself meanwhile, is looking decidedly less so against the greenback, with the charts implying the single currency may not mind the gap, it may fill the gap.