US Q1 GDP rose 2.3%, y/y topping the 2.0% forecast and  the employment cost index rose 0.8% in Q1.  Both data points suggest the FOMC may be a tad hawkish in next week’s statement.

Lingering hopes that the Bank of England will raise interest rates at next week’s meeting were trashed this morning after UK Q1 GDP rose a mere 0.1%, q/q rather than the 0.3% forecast. GBPUSD went into free-fall, plunging to 1.3781 from 1.3933.

EURUSD suffered a similar fate to Sterling but not to the same magnitude.  Prices dropped from 1.2115 to 1.2066 even though Eurozone Economic Confidence, Sentiment, Consumer Confidence and Business climate data were all better than expected. A dovish ECB outlook continues to weigh on the currency.

USDJPY remained in a 109.15-109.48 range.  The Bank of Japan policy meeting did not create any fireworks.  Short-term rates were left unchanged at -0.1%.  The only surprise was the BoJ dropped the reference to when it would achieve its inflation target.  Japan March Retail Trade was 1.0% (forecast 1.7%).  However Large Retailer’s Sales rose 0.1% (forecast -0.5%) which cushioned the blow.  The employment report was as expected.

AUDUSD posted a gain in the Producer Price Index (Actual 1.7% vs forecast 1.2%, q/q) but broad US dollar strength drove it and NZDUSD lower.

Global risk sentiment should be improving.  North and South Korean leaders met in the DMZ and made nice.  The US is sending Larry Kudrow, Robert Lighthizer and Peter Navarro as well as Steven Mnuchin to talk trade with China, next week.  That has fueled rumours of a positive Nafta announcement in the coming days.

USDCAD rallied due to general US dollar demand but remains within this weeks 1.2800-1.2900 range.

USDCAD Technical Outlook

The intraday technicals are bullish while prices are above 1.3835, looking for a break above 1.2900 to extend gains to 1.2950.  A break of 1.2950 targets 1.3125.  A break beelow 1.2810 would lead to a retest of 1.2720.  for today, USDCAD support is at 1.2835 and 1.2810.  Resistance is at 1.2895 and 1.2950

Today’s Range 1.2810-95