Despite Asia markets being somewhat stodgy this morning investors remain in the mood to take equity markets higher this morning after yesterday’s improved US retail sales numbers and as such European markets look set to open higher this morning. On a fairly light day for economic data, apart from the latest German ZEW survey and European industrial production numbers, we can once again amuse ourselves as European policymakers continue to bicker and squabble and tie themselves up in knots about the timing or otherwise of a banking union with the start of the latest Ecofin meetings. Yesterday we saw Cyprus get its first aid tranche of €2bn while the Eurogroup came to an agreement with respect to the release of the latest tranche of Greek aid of €4.2bn with another €3.3bn to be released in return for further measures. It was also agreed that Portugal met the criteria for another €2.1bn of aid. Today’s Ecofin meetings are likely to focus on the next steps with respect to a banking union with the Eurogroup chief and Dutch finance minister Djisselbloom insisting that the necessary steps could be taken without treaty change, a position which did not find favour with German finance minister Wolfgang Schaueble who insisted that any such measures would require treaty change. The Eurogroup chief was also joined by French finance minister Moscovici and other EU finance ministers in insisting that the necessary steps should be completed quickly ideally by the end of the summer, though Mr Djisselbloom also went on to add any treaties could be changed later in order to ensure any new measures have a solid legal basis. This does rather beg the question if you can pass the necessary measures now without contravening EU law, then why change the treaty at all, which would seem to suggest that once again EU finance leaders are practising cognitive dissonance. It remains highly unlikely that Germany will agree to anything resembling banking union before September’s elections which is probably why Mrs Merkel has remained fairly quiet on the matter. In any case the health of the German economy will once again be back in the spotlight today with the latest ZEW sentiment survey for May. After the 6.9 reading at the end of last year we saw large jumps in Q3 peaking at 48.5 in March, however we saw a sharp drop to 36.3 in April, in the wake of the problems in Cyprus and Italy. There is an expectation of a small rebound to 39.5 in the wake of the recent record highs in the DAX and last week’s rebounds in factory gate and industrial production data for March. This number should be treated with care though as it is a barometer of investor sentiment and given the safety net afforded by central banks it could bring a false sense of security. The IFO survey is a much better indication of German sentiment, but that isn’t released until the 24th. In light of last week’s better industrial production numbers from Germany we get the latest Eurozone industrial production numbers for March and we can expect a monthly improvement here as well from February’s 0.4% rise with an increase of 0.5% expected, though this could be higher in light of Germany’s better numbers last week. The year on year number is expected to remain negative though. EURUSD – the failure to push much beyond the pushing below the 200 day MA at 1.2995 keeps the onus towards the downside and the potential for further weakness. While below 1.3020 the risk remains for a move back towards the 1.2755 March and April lows. The 1.3200 level remains the key resistance level while we also have 1.3235 the 50% retracement of the 1.3710/1.2755. GBPUSD – a bearish weekly candle last week and the break below trend line support from the 1.4835 lows at 1.5345 opens up the risk of a move lower towards the 1.5200 level. We need to get back above the 1.5410 level to stabilise and retarget the 1.5600 level. EURGBP – the euro continues to chop between support at 0.8400 and resistance at 0.8500. Only a break below 0.8400 has the potential to open up a move towards 0.8305 trend line support from the 0.7755 low. Below that we also have the 50% retracement of the 0.7755/0.8815 up move at 0.8280 The main resistance remains at the 0.8500 level and while below the 200 week MA at 0.8520. USDJPY – finding a few sellers around the 102.20 area, however last week’s break above the 100 level opens up the potential for a move towards 105.50, 61.8% retracement of the 124.15/75.30 down move. Given we have now broken this key top any pullbacks are likely to find support at the April highs. Only back below 99.80 retargets 98.50. CMC Markets is an execution only provider. 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