EUROPEAN session review: Euro and pound continue to decline

Data released: 

06:00 GMT Germany Gross Domestic Product s.a (QoQ) (Q1) Preliminar 0.8% 0.7% 0.4% 

06:00 GMT Germany Gross Domestic Product n.s.a (YoY) (Q1) Preliminar 2.5% 2.2% 1.3% 

06:00 GMT Germany Gross Domestic Product w.d.a (YoY) (Q1) Preliminar 2.3% _ 1.4% 

08:00 GMT EMU ECB Monthly Report 

09:00 GMT UK CB Leading Economic Index (Mar) 0.3% _ 0.4% 

09:00 GMT EMU Consumer Price Index (YoY) (Apr) 0.7% 0.7% 0.5% 

09:00 GMT EMU Consumer Price Index - Core (YoY) (Apr) 1.0% 0.7% 0.7% 

09:00 GMT EMU Consumer Price Index (MoM) (Apr) 0.2% 0.2% 0.9% 

09:00 GMT EMU Gross Domestic Product s.a. (QoQ) (Q1) Preliminar 0.2% 0.4% 0.2% 

09:00 GMT EMU Gross Domestic Product s.a. (YoY) (Q1) Preliminar 0.9% 1.1% 0.5% 

Today’s EU figures were everything but encouraging. They confirm that Germany is still outperforming its peers and with few exceptions, mainly Spain, the rest of the zone is still struggling. Although Q1 figures were distorted by specific factors, domestic demand among some countries (France and probably Italy in particular) remains fragile. Survey data, however, announce a much brighter scenario for the second quarter. 

EURO 

The euro fell to the lowest level in 11 weeks versus the dollar after European Central Bank Vice President Vitor Constancio said policy makers are prepared to add further monetary stimulus if needed. 

The euro remained little changed near daily lows after the latest string of Eurozone data showed Q1 GDP came in below expectations, while April CPI met forecast. 

Eurozone gross domestic product grew 0.2% in the first quarter 2014 and 0.9% YoY, missing expectations of 0.4% and 1.1% respectively. Meanwhile, consumer inflation rose 0.2% in April and 0.7% YoY, matching market’s consensus. 

EUR/USD tested support at $1.3640. Below support comes at $1.3560 (Feb 12 lows). Initial resistance comes at $1.3720/30, then - at $1.3770/80. 

POUND 

The pound has remained modestly weaker following the release yesterday of the latest BoE Quarterly Inflation Report and UK employment report. The BoE’s QIR presented a slightly more dovish than expected outlook for monetary policy as the updated inflation profile remained broadly unchanged despite a further lowering of the unemployment rate projections implying that the BoE still remains comfortable that upside risks to inflation from the ongoing removal of economic slack is not yet material. 

GBP/USD trades at $1.6750. Initial support is at $1.6720 (trend line from Nov 11’2013). Below support comes at $1.6660 (Apr 15 lows). Initial resistance is around $1.6780, then - at $1.6820 (May13 lows). 

YEN 

1Q GDP numbers this morning came in warmer than expected and expect USD-JPY to remain soggy after sinking below 102.00 on Wednesday and with US Treasuries rallying overnight. Despite the GDP numbers, investors are unlikely to be swayed from the perception that the Japanese economy may be losing momentum into the summer. 

The Japanese economy expanded an annualized 5.9% from the previous three months in the first quarter, beating analysts’ estimates for a 4.2% expansion, a report showed today. 

Separate report showed Japanese consumer confidence index April fell 37.0 vs 37.5 previous. 

USD/JPY holds below Y102.00. Further resisatance is around Y102.75 and Y103.40. Stronger one remains at Y104.30/80. Below Y102.00 support comes at Y101.30 (Apr 10 lows) and Y100.70 (Feb 7 lows). 

DATA AHEAD 

US Consumer Price Index will be published at 12:30 GMT.

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