Europe’s markets look set to open higher again this morning despite the ECB nudging down its growth forecasts for the European economy yesterday and the Bank of England stepping back from further asset purchases, no doubt due to fears of increased inflationary pressures, brought about by the recent sharp falls in sterling. The latest Chinese trade data released overnight also showed surprising resilience with a big jump in exports, though the impact was slightly offset by a bigger than expected decline in imports suggesting that domestic demand could be a problem. A surplus of $15bn as opposed to an expected deficit of $6.9bn is likely to be treated with optimism and evidence that despite problems in Europe the Chinese economy continues to recover from last year’s slowdown. Today’s latest Bank of England/Gfk inflation expectations report for February is likely to show an increase in from January’s 3.5% and likely to increase uneasiness about the current direction of travel of monetary policy. In Europe the rise in French unemployment to a euro era record of 10.6% and the sharp drop in German factory orders for January of 1.9% were summarily set aside despite the fact that this drop in orders appears to be in complete contrast to all of the recent January data out of Germany in the form of IFO and PMI data which has been fairly positive. German industrial production for January is expected to show a gain of 0.4%, up slightly from December's 0.3% rise. It appears that once again markets are taking their cues and exuberance from US economic data, embracing the good data and interpreting the disappointing data as further reasons for the Fed to maintain its QE forever monetary policy and in the process presenting investors with what seems like a no lose scenario, always a situation that usually ends up as being too good to be true. Today’s release of the February US jobs report looks likely to be received in much the same manner with analysts revising up their forecasts in the wake of this week’s better than expected ADP employment report for February, with some estimates as high as 180k. The ADP report came in with a figure of 198k, well above the 172k expected while the January also received a hefty upward adjustment to 215k. Putting aside the fact that correlations between the two numbers have always been somewhat flaky, expectations for today’s report are for a gain of 162k new jobs, up slightly from January’s 157k, though this figure is likely to be revised. The unemployment rate is likely to remain at 7.9%. EURUSD – the 1.2960/70 level appears to be holding for now and while it does the risk of a pullback towards 1.3125 and the 100 day MA intact, as well as the 1.3160 level, remains a possibility. A move above 1.3160 targets 1.3290 and the 50 day MA. The H&S objective at 1.2900 still remains in sight and the next target, while the next long term support level remains at 1.2845 and the 200 day MA. GBPUSD – a late plunge towards the 1.4950 level in late New York has brought the pound back close to its 2010 lows and with it the prospect of an even bigger drop towards the June lows at 1.4350 via 1.4820. The key level on the upside remains at last weeks high at 1.5220 and this remains the key obstacle to further gains towards 1.5400. EURGBP – yesterday’s break above the 0.8680 level has seen the single currency push up above 0.8720 and we could well see a test towards the previous highs at 0.8815. The 0.8680 area should now act as support on any pullback, with only a drop below retargeting the lows this week at 0.8580. USDJPY – yesterday’s push above the 94.00 level has seen the US dollar push up and exceed the 2010 highs at 95.00. If we are able to hold above this level we could well see a move towards the 99.80 level which is 50% retracement of the 124.15/75.30 down move. Pullbacks should now find support at the 94.30 area and below that at 92.80

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