The worst daily decline in Chinese stock markets since 2007 spooked global stock markets yesterday, and while Chinese authorities earlier this month showed a determination to try and put a floor under the stock market, with a series of strongly interventionist measures, the rather heavy handed reaction to that decline has probably served as a catalyst for this one. Successive easing measures since November don’t appear to be filtering down into the real economy and this is raising concerns about the ability of the Chinese economy to sustain the growth target set by Chinese authorities at the beginning of this year. Furthermore the turmoil and losses to heavily margined investors caused by the plunging stock market aren’t likely to make for a Chinese middle class become any more enthusiastic about investing into an overvalued and already volatile, heavily manipulated market. This concern about a much slower growth path for the world’s second largest economy has also fed into a negative feedback loop on commodity prices sending copper prices to their lowest levels since 2009, while oil prices have continued their downward slide, with Brent prices down 10% from its July highs, and lower for the fourth day in succession. The rout in commodity prices wasn’t confined to basic resources yesterday as we saw heavy falls in corn and soybean prices, while sugar prices are also languishing at 5 year lows, which is likely to feed into a significant disinflationary environment in the coming months. As the Federal Reserve starts its two day policy meeting it seems quite likely that these events are likely to play a part in the US central banks thinking with respect to its policy stance, and with events in Greece by no means resolved tomorrow’s decision is unlikely to offer any clues with respect to a September move, particularly after yesterday’s rather mixed durable goods data for June, which saw downward revisions to the May numbers, which in turn, net of transports, translated into a Q2 gain of 0.1%. That’s not indicative of a US consumer imbued with confidence. Today’s US consumer confidence numbers for July are expected to show a slight decline to 100 from 101.40. On the data front we have the first iteration of UK Q2 GDP, with expectations of an improvement to 0.7% from Q1’s 0.4% expansion. A good number here will raise expectations about next week’s Bank of England rate meeting and the prospect of the first dissent on the interest rate consensus seen since the beginning of the year. The risk is given that only 40% of the initial data will be available that we could see the initial reading come in short. Manufacturing has been disappointing throughout most of Q2, while construction and services only started to pick up through the middle to latter part of the quarter. While the final figure may well be 0.7% the risk is that the initial figure might come in short, which could see the pound slip back EURUSD – the move through 1.1050 and trend line resistance from the highs at 1.1435 increases the prospect of a move back through the highs this month at 1.1215, and a return to the June highs, but we need to stay above 1.0980 initially. A move through 1.0970 targets the 1.0800 level and trend line support from the lows this year at 1.0460. GBPUSD – while below 1.5675 resistance the prospect of further gains seems limited in the short term. While we remain above the 200 day MA at 1.5410 the prospect of further gains remains intact and only a move below 1.5400 would argue for a move towards the 1.5200 level. A move above the highs of the last two weeks at 1.5675, would retarget the 1.5820 level. EURGBP – yesterday’s break above the 0.7120 level could well see a move towards the 0.7220 level and the highs this month. The recent gains of the last few days could suggest that a short term base is in. The current stabilisation needs to hold above the 0.7110 level for this to unfold. USDJPY – we appear to be gearing up for further weakness towards 122.50, but we do have support at the 123.00 level for now. A move back through 123.70 is needed to suggest a return to the 124.50 level. CMC Markets is an execution only service 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.