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UK votes, ECB decides, Comey testifies
Asia traded in a slightly risk-off mood due to soft economic data out of Japan and Australia; European indices kicked-off slightly positive to an event-full day, including former FBI director Comey’s testimony, the UK snap general election and the European Central Bank (ECB) meeting.

Energy stocks (+1.12%) started the session better bid in London, as oil partially recovered yesterday’s aggressive losses.

Oil tanked by 5% on Wednesday, as the EIA report revealed unexpected 3.3 million barrels rise in the US inventories last week, versus a contraction of 3.1 million barrels expected. The WTI crude tanked to $45.80, the minor 76.4% retrace on May rise. The sell-off could extend toward the $45 mark, buyers are touted at this level.

Pound, FTSE holding breath as UK votes

The election polls in the UK have been hectic, as PM Theresa May’s Tories lost their popularity meaningfully during the recent weeks.

According to the latest YouGov poll, the Conservatives’ lead widened 7 points to 42% against the Labour, which could gather 35% of voters’ support at today’s snap election.

To us, it is likely that the Conservatives walk out with a slim majority. If this is the case, Cable should remain ranged between 1.28/1.30 area.

A strong majority for Tories could send the GBPUSD above the solid 1.3045 mid-term support (major 38.2% retracement on post-Brexit sell-off).

On the other hand, a hung Parliament will certainly trigger significant capital outflows from the UK assets, but still is expected to be less harmful for the pound than a Labour win. In this context, an unexpected and sudden shift to the Labour Party would change the Brexit dynamics completely and push the political environment in the UK to a total unknown. The GBPUSD could retreat below the 1.25 mark. Banks and financials could suffer the most in case of a Labour majority.

The FTSE 100 is expected to behave parallel to the pound in the medium term, once the short-term impact of stronger, or softer, pound is digested.

The first exit polls will be out at 10pm UK time and first results are expected an hour later. We expect to have a clearer picture at about three hours after the first exit polls.

ECB to revise growth higher, inflation lower and balance its tone

The European Central Bank (ECB) meets today and is expected maintain its policy rates unchanged. The statement will be in focus, the majority of analysts expect the ECB to modify the language of its statement, more precisely, replace ‘risks to growth’ by a more balanced view. The ECB could revise its growth forecasts higher, while softening its inflation outlook due to weaker energy and commodity prices.

The Quantitative Easing (QE) exit strategy will unlikely be part of discussions, yet softer inflation outlook would mean that the QE tapering would be delayed toward the end of the year, from September anticipated as of today.

The EURUSD consolidated gains in the tight range of 1.1247/1.1269. Key resistance is eyed at 1.1300 mark, if surpassed, will shift the mid-term focus to 1.1500 mark in the continuation of a stronger euro and a softer US dollar configuration.

Gold: good, old risk-off friend

Gold traded down by 0.14% despite the limited risk appetite in Asia. However, the yellow metal could pare earlier losses throughout the European and US sessions given that some investors would prefer to park their cash in a safer harbour.

For a risky day as today, the $1’300 level per ounce is a reasonable target for gold lovers and investors seeking safety.

Weak data out of Japan, Australia; mixed sentiment in China

Japanese GDP growth eased to 0.3% quarter-on-quarter in the first quarter from 0.5%, versus 0.6% expected by analysts. The sharp narrowing in the trade terms has been the major cause of the weak first quarter performance in Japan, while the business investment accelerated faster than expected. The USDJPY remained quiet below the 110.00 mark.

The Australian and Chinese trade data surprised on the downside as well. Australian trade surplus collapsed from A$ 3’169 million to A$ 555 million in April, versus A$ 2’000 million expected, on the back of a sharp fall in commodity prices.

China’s imports rose unexpectedly and capped the May trade surplus at $40.81 billion, versus $47.80 billion expected by analysts. Exports were satisfactory though, helping the Shanghai's Composite (+0.32%) and the Hang Seng index (+0.34%) at today's session.

The AUDUSD remained offered at about its 100-day moving average, 0.7550. The key mid-term support stands at 0.7588 (major 61.8% retracement on March – May decline). Presently, the Aussie lacks idiosyncratic/endogenous support to gain a meaningful upside momentum against the US dollar. Nonetheless, the waning Federal Reserve (Fed) expectations beyond a hypothetical June rate hike, could maintain the US yields capped and encourage carry traders to push the pair toward the mid-term resistance at 0.7750/0.7800.