Following the announcement that Eurozone HICP inflation had increased from 0.5% last month to 0.7% in April the Euro has actually rallied despite missing estimates. This seems to have been because traders had already been half expecting the very slight miss after the German inflation data disappointed yesterday.
This pickup in inflation slightly reduces the likelihood of looser monetary policy by the ECB and hence why after the initial reaction lower on the miss of the 0.8% expected, the Euro has actually rallied.
Aside from that, the dollar has reversed its earlier strength and the US Dollar Index is now lower on the day. Along with the pickup in Dollar/Yen it suggests that risk appetite has improved as the morning has progressed. In accordance with this, the gold price has recovered slightly as the dollar has dropped off, but there has been little conviction behind the move.
However, it would appear as though the European equity indices are still on the lead from Asian trading, as there is a mixed bag of gains (FTSE 100) and losses (DAX and CAC 40). It seems as though traders are now settled in for the announcement of first of all the ADP employment (at 13:15BST, with 210,000 expected) and then US GDP (at 13:30BST, with 1.2% expected).
The FOMC this evening may end up being a bit of a non-event. With no press conference for Janet Yellen or change of economic forecasts, little more is expected than to taper by a further $10bn on the asset purchases. It would appear that GDP is likely to be the main driver of the US session.
EUR/USD spiked lower initially following the HICP data, but formed support at $1.3775 and is now trading higher on the day. There is still no real direction for the pair which has broadly traded sideways over the past couple of weeks. The US growth data could be key for the day. A number stronger than 1.2% would put the pressure back on Euro/Dollar and could see the $1.3775 level under threat again.
GBP/USD is now basically unchanged on the day as traders wait for the US data. There is still a very slight upside bias in place, with the higher lows at $1.6791 and more importantly $1.6775.
USD/JPY shows that risk sentiment on the day has picked up. Having been 35 pips lower in early trading following the Bank of Japan decision to maintain its monetary policy, the yen has gradually weakened throughout the morning to pull Dollar/Yen higher once more. Trading over the past few days has been quite choppy as traders have struggled to know how to be positioned ahead of a slew of economic data. However moving into the US growth number the outlook is improving.
Gold is still trading lower on the day following the initial weakness during Asian trading, but has picked up slightly in the last couple of hours as the dollar has weakened. The move could though be just another chance to sell on an intra-day basis. The falling 55 hour moving average is the basis of support for the rallies (currently around $1295.70) and could easily be used for a chance to resume the downside pressure for a retest of yesterday's low at $1285.99. Any announcement that is Dollar positive should help induce this move.
The European indices have been fairly muted today, while the 5% gain on Royal Dutch Shell A (RDSa.LONDON) after reporting a strong set of numbers slightly skews the positive impact seen on the FTSE 100 this morning. Technically the FTSE 100 is actually in a decent recovery phase currently as it eyes a move back above 6800. The DAX has though become stuck under the resistance at 9645.