Coming off the back of another positive finish for US markets last night, today’s European open looks set to be a fairly flat one, primarily due to caution ahead of some important French and German April economic data due out later this morning, and an uninspiring Chinese PMI number. While the recent rebound in US markets has been primarily driven by optimism about a thaw in the US economy as the weather warms up, the same can’t really be said for some of the more recent economic data coming out of Europe. That is not to say that there hasn’t been an improvement, but some of the more recent German data appear to suggest an economy that could be starting to hit a bit of a plateau. Last week’s disappointing ZEW survey suggests an element of caution starting to take hold amongst some investors due to concerns about a slowdown in growth in China and Russia, two key markets for German exporters. Those concerns have been alleviated a little by this morning’s HSBC Chinese manufacturing PMI data for April, which did come in at 48.3, an improvement on March’s 48 reading, but it still remains firmly in contraction territory. Today’s flash April German manufacturing and services PMI data are expected to show a slight improvement on the March numbers coming in at 53.9 and 53.3 respectively. On a more positive note there was a surprising turnaround in French manufacturing and services PMI activity in March, which contrasted sharply with some of the recent underperformance seen from the sclerotic French economy in recent months. Today’s latest flash PMI data are likely to show whether the March numbers were a “flash in the pan” or one-off, or were an early indication of a French economy on the brink of a turnaround in economic activity. The French manufacturing and services numbers for April are expected to show a slight fall back from the rebound seen in March, coming in at 51.9 and 51.3 respectively, down from 52.1 and 51.5. In the UK we await the most recent Bank of England minutes, but there are unlikely to be any fireworks here given that the last meeting happened well before last week’s unemployment numbers showed a fall below the now discarded guidance threshold of 7%, to come in at 6.9%. One thing is certain the rise in average earnings and the decline in unemployment is likely to make for a fertile debate at the next meeting in just over a couple of weeks time. Of more interest will be the latest public finance numbers for March which are expected to show that the Chancellor narrowly missed his borrowing target for last year, coming in at £110bn, just above the £107.8bn target, with the March number expected to show a £9bn deficit. On a more positive note the latest CBI data for April is expected to show a continued improvement in business optimism as well as an improvement in industrial orders. EURUSD – the euro continues to find it difficult to rally with any conviction remaining well short of the recent highs at 1.3970, peaking at 1.3865 last week. As such we continue to look as if we could well start to drift lower, but for now we appear to be finding support at 1.3780. There is also long term trend line support from the lows last year coming in at 1.3745. A break below the April lows at 1.3675 could well see a move towards 1.3500. GBPUSD – continues to look well supported with the 1.6845 now acting as a temporary cap. The move higher continues to lack conviction, meaning that we continue to have some resistance here. As such this level continues to remain important with respect to further progress. We need a move above 1.6880 to put the pound above its November 2009 highs. While below here the risk of a pullback towards 1.6555 remains a possibility, on a break below 1.6670. EURGBP – the pressure remains on the downside with a cap currently around the 0.8300/10 level. While we have moved below the March lows at 0.8205, the follow through has been limited at best but we look on course for a move towards the lows this year at 0.8158. The resistance at the 200 day MA at 0.8390 remains a key obstacle to further gains. USDJPY – the US dollar continues find itself well supported but we need to see a move back through the 102.80 level to suggest a move back to the highs at the beginning of the month at 104.10. We have solid support at the 101.20 area and the March low. A move through 101.20 opens up the 200 day MA at 100.80, a break of which could well see a move towards 98.60. CMC Markets is an execution only provider. 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