Despite hitting their lowest levels since May the S&P500 and US markets in general were able to stabilise yesterday, closing slightly higher after their sharp sell-off earlier in the week. European markets, on the other hand were a different proposition, falling heavily as investors had to digest a number of disappointing economic data reports, with Italy heading back into recession and German factory orders cratering in June by 3.2%, dragged down by slowing exports to the Eurozone as well as ongoing concerns about the effects a prolonged stand-off with Russia might have on its economy. Given how poor this number was yesterday it seems certain that today’s German industrial production data will be equally as awful, even though expectations are for a 1.4% rise. This seems unlikely given yesterday’s factory orders numbers. The increase in tension as a result of troop build-ups on Ukraine’s eastern border would appear to suggest that there will be no quick and easy fix to relations between the western nations and Russia, given the water that has flowed under the bridge in recent weeks. Taking that assumption to its logical conclusion would then suggest that the current situation is likely to act as a drag on the German economy for some time to come, and that is a best case scenario assuming the situation doesn’t deteriorate any further. Given the recent turn of events the focus is likely to turn to today’s policy decision by the ECB and ECB President Mario Draghi’s press conference, particularly after last week’s further deterioration in the monthly inflation numbers, as well as yesterday’s poor economic data. Despite the poor data we are unlikely to see any change in policy, given that the TLTRO’s haven’t even started yet, but markets will be paying close attention to the press conference and in particular the ECB President’s views on what negative effects the situation in Ukraine is likely to have on the ECB’s economic forecasts for the euro area. Mr Draghi may also take up the opportunity to talk the euro lower given how the single currency has slowly declined over the past couple of months from the 1.3995 highs we saw in early May and current momentum could well signal a gentle helping hand in that direction. Just before the ECB decision we have the latest Bank of England rate decision, complete with all new members of the MPC including Nemat Shafik’s first vote. In testimony in July to MP’s the new deputy governor suggested that the Bank of England could well revise down its estimate of spare capacity in the economy. This would certainly bring the prospects of an interest rate rise that much closer, though yesterday’s disappointing manufacturing and industrial production data for June, following on from the poor numbers in May continue to point to the uneven nature of the recovery, given their massive divergence from private sector PMI surveys for the same months, which have been strongly positive. Nevertheless it seems certain some members of the MPC are moving closer to the time when we could well get a split vote, and while we won’t know that today, when the minutes are released in a couple of weeks we may well see some evidence of dissent starting to appear. We could even get some clues earlier than that with the inflation report next week, but even if we do get some dissent, with wages growth set to remain weak, and lagging well behind inflation, it is difficult to see where the five votes needed for a change in current policy would come from. EURUSD – having hit its lowest level since November last year yesterday the euro quickly bounced back falling just shy of its November lows at 1.3300. Having posted a daily hammer, there is a chance we could well have seen the lows in the short term. We have resistance at the previous lows at 1.3475, but would need to see a move back through 1.3500 to retarget the 1.3570 level and then on to 1.3640. GBPUSD – still finding support in the low 1.6800’s but the current resilience needs to overcome the 1.6920 area to retarget 1.7000. The 1.6780 level remains a key support with a break retargeting 1.6700. EURGBP – could well see further range trading between the recent highs just below the 0.8000 level and support back towards the 0.7900 area with the bias remaining towards the downside and the 0.7870/75 area. The pressure remains for a move towards 0.7780, with any rebound needing to overcome the 0.8000 level to stabilise in the short term. USDJPY – having been unable to overcome the recent range highs at 103.00/10 we’ve seen the US dollar pullback along with US yields. There is nothing to suggest though that we won't continue to trade within the broad range that we've been in over the last six months. We have resistance at 103.00, and support at 101.80. 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.