Last night’s positive finish in US markets would appear to show that investors could be coming to terms with the idea of some form of Fed tapering given that the move higher came largely as a result of a fairly well received “Beige Book” update on economic conditions in the US economy. The US economy grew at a “modest to moderate” pace over the past few weeks with decent activity in the manufacturing and services sectors as well as rising consumer spending in most districts. This late push higher is likely to see European markets open higher this morning as we await two important central bank decisions from the Bank of England and the European Central Bank, as well as the start of the G20 in Russia, with events in Syria likely to dominate proceedings, particularly in light of last night’s decision by the US Senate foreign relations committee to approve a limited military strike. The full Senate is due a vote on the matter next week. While we don’t expect to see any fireworks from either central bank meeting the problems facing both Mr Carney and Mr Draghi could not be more different. As for the G20, while there may not be much in the way of fireworks we could well see a lot of tension, given the opposing views of the US and Russia, over the rationale for any type of intervention. Bank of England governor Carney has had the decidedly good fortune to take over the UK central bank at precisely the time that the UK economy appears to be building up a head of steam. While this is a good thing it is presenting the monetary policy committee with a rather tricky problem of its own making. As a result of the newly adopted policy of forward guidance the committee have tied themselves to commit to keeping base rates at 0.5% until 2016, which if the economy was struggling would be entirely understandable. On the contrary the UK economy is firing on all cylinders with a hat-trick of data beats on PMI’s this week pointing to potential Q3 growth of at least 1%, with the likelihood that unemployment could fall a lot quicker than the banks own estimates. Given the Bank of England’s recent record on inflation the markets are no less convinced that its record on unemployment will be any better, and as a result the market is pricing in a rate rise much sooner than 2016. While today’s rate decision won’t add any colour to that particular argument, we may get a statement along similar lines to the one we got after the July meeting stating that the rise in rates is not warranted by the economic data. The risk is, given what we’ve seen in the past couple of months in terms of the data that line won’t wash for much longer, and could undermine the credibility of the guidance.Over in Europe ECB President Mario Draghi has a completely different problem, namely a basket case of an economy that appears to be coming out of intensive care, whose economic heart in the form of Germany is starting to beat again, but whose limbs in the form of the peripheral countries are starting to see some blood flow into them, but not anywhere near enough to suggest that they can start moving with any degree of independence. While we don’t expect to see any movement on rates, or any change in policy elsewhere, there is a chance we might see a revision of growth and inflation forecasts in light of the recent pick up in economic data. In the US, the starter for ten in respect to this week’s non-farm payrolls report due tomorrow, is the August ADP report, and weekly jobless claims numbers which are expected to continue to paint a broadly positive view of the US labour market on the back of last night’s broadly positive “Beige Book” report. The August ADP employment report is expected to show jobs growth of 180k new jobs, slightly down from the 200k in July. Weekly jobless claims are expected to come in at 330k, unchanged from last week while the latest services ISM estimate for August is slated to slip back slightly from 56 to 55.EURUSD – the failure to breach the 100 and 200 day MA at 1.3140, keeps the onus towards a return towards the 1.3310 area. While this key support level holds the risk of further losses towards 1.3000 is slim given yesterday’s bullish daily candle. A move back above 1.3310 argues for retest back towards the 1.3410 area. GBPUSD – the pound continues to close in on the previous highs at 1.5715 after yesterday’s move through the 1.5600 level. 1.5745 remains the big level and 200 week MA. While above trend line support at 1.5510 from the 1.4815 lows, and last weeks low at 1.5440 the trend remains positive. Only below the 1.5400 level argues for a sharper move towards 1.5340, and then 1.5260. EURGBP – this week’s break below the 200 day MA for the first time this year shifts the bias to the downside on the euro towards the 0.8395 April lows, with another new multi week low at 0.8425 yesterday. Pullbacks should find some selling interest at around the 0.8485/90 area initially. USDJPY – we’ve seen a move just shy of the 100 level so far, and this week’s break above the cloud resistance at the 98.80 level and the 98.90 trend line resistance from the May highs at 103.75 still points to the possibility of a test back towards the 100.30 area initially, and then a retest of the highs this year. Only a move back below 98.80 undermines this scenario and argues for a test back towards the 97.00 level. 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.