Having seen a strong rebound yesterday driven by much better than expected US housing data and consumer confidence data Europe’s markets look set to take a breather and open lower this morning ahead of the annual European Commission evaluation of the budget plans of all 27 EU states, as it looks to implement its excessive deficit reduction procedures. Of particular interest will be what conditions the commission imposes on France and Spain in exchange for extending the time for these economies to get their deficits below the 3% as stipulated by the excessive deficit reduction procedure. While concerns remain regarding the health of the broader European economy investors seem comforted by the fact that whatever happens economically the likelihood of any prospect of significant credit tightening seems remote and as such they remain of the view that stock markets are good bets to buy on dips. The divergence between the German economy and the rest of Europe is once again set to be put into sharp focus today with the latest May German unemployment numbers set to remain at their current low levels of 6.9% with a rise of 5k expected. The latest inflation numbers are expected to show that May CPI remains well below the ECB’s 2% target rate at 1.3%, raising once again the possibility that the ECB could well cut rates at next week’s monthly rate meeting. Speculation about negative deposit rates continues to be particularly divisive amongst ECB members with French ECB member Christian Noyer stating yesterday that he remains unconvinced about the need for negative deposit rates. Irrespective of whether we get negative deposit rates the problems in Europe are likely to be thrown into sharp focus later today as the OECD delivers its May economic outlook for the Euro area and the findings aren’t likely to be positive with France in particular set to be in the spotlight as its economy continues to diverge away from Germany’s. In Spain the economic data continues to remain poor, with adjusted retail sales set to show a decline in April of 6.4%, a slight improvement on March’s 8.9% fall. With mortgage lending showing a year on year fall of 34% yesterday, concerns remain about the state of the Spanish banking sector after Bankia shares fell sharply again yesterday after another 11bn shares hit the market as part of another multi-billion euro recapitalisation of the troubled bank. In the UK the latest CBI retail sales numbers for May are expected to show an increase from the brief dip into negative territory in April to a positive reading of 4 and the best reading since February. EURUSD – the single currency continues to run into selling pressure near to the 200 day MA near to the 200 day MA, just above the 1.3000 level. On the other hand any dips continue to be fairly well sought after with the recent lows at 1.2800 offering decent support. Only the twin lows at 1.2750, which we last saw in March and April, remain the main obstacle to a move lower, towards 1.2680. Only a move above 1.3020 argues for a move towards 1.3200. GBPUSD - the pound continues to find support at the 1.5020/30 level suggesting the possibility of a rebound. Only a break below 1.5000 suggests that we could well see a move back to this year’s lows at 1.4830. We need to see a move back through 1.5280 and last week's high to stabilise and suggest a move back to the 1.5400 level. EURGBP – the euro continues to find the air anywhere near the April highs above the 0.8600 level a little thin. While above the 0.8520 level where we have the 200 week MA keeps the bias for a move higher. Only a move back below 0.8520 negates and suggests further range trading towards 0.8450. USDJPY – the moves at the end of last week could well see a delay to the 105.50 area scenario. A key reversal week and bearish daily candle last week could well see the likelihood of a move towards the 100.00 level in the near term. The US dollar needs to get back above the 102.80 area to retarget the highs last week at 103.75. Only a move back below 99.80 retargets 98.50.. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.