A positive end to the week for US markets failed to stop US stocks finishing the week in negative territory as investors weighed up whether current valuations were an accurate reflection of the current and prospective economic outlook in the months ahead. US investors will be hoping that this weeks set of earnings announcement reinforce that optimism, when we hear from JP Morgan, Citigroup and Bank of America amongst others. The concern is that lower trading volumes, as well as a fairly muted economic bounce back in Q2 will have had a significant effect on the companies turnover and trading revenues. Investors will also have a fresh warning from the head of the Bank for International Settlements ringing in their ears about the risks of the continuing hunt for yield in the current low rate environment. While there does appear to be a degree of optimism about a rebound in US economic activity the same cannot be said for Europe where markets posted one of the worst weekly declines since March, on a combination of concerns, not least a return to concerns about the European banking sector in the light of events surrounding the solvency of Portugal’s Espirito Santo bank. We did see a modest recovery on Friday after various officials tried to play down concerns that these events could spark a contagion effect, but they do throw up some serious questions for the troika of lenders, including the IMF, after Portugal was given a clean bill of health in the wake of the exit of its bailout earlier this year. Were these problems already known about and glossed over? Last week's events were also a wake up call for complacent markets that for all the exuberance about falling risks, the weakest European economies remain a long way away from fiscal health, as do their banking systems. The sudden collapse in industrial production in May across the board has also thrown up the prospect that the current rebound in European economic activity has run into the sand, after German, French, Italian and Netherlands industrial production all showed sharp declines. This is a big concern given the high debt to GDP ratios of countries like Portugal, Italy and Greece, raising the prospect, once again that in the case of Portugal and Greece in particular that more restructurings could well be on the table sometime in the future. With European banking stress tests set to get underway in the coming months last weeks events would appear to be a timely reminder that Europe's problems are a long way from being fixed. The latest EU industrial production numbers for May are due out later this morning, and expectations are for a fall of around 1%, though it could well be an even bigger fall given last weeks poor numbers, from Germany and the rest. Other key events later this week include the latest UK inflation, unemployment and average earnings data, with the focus once again set to be on the Bank of England and when we can expect to see a rise in interest rates. This is likely to be on the agenda when the Treasury Select Committee quiz the Bank of England governor Mark Carney when he testifies in front of it tomorrow. Also out later this week investors will be hoping that the recent slowdown in China is starting to show signs of a turnaround when we get the latest Q2 GDP numbers, with the hope that the recent limited stimulus measures announced by Chinese authorities have been enough to keep the economy on track for the 7.5% growth target. EURUSD – still in the overall uptrend since the 2012 lows. The broader range remains intact and while we hold above the 1.3500 level, the risk of a move back towards 1.3700 remains more likely. The key support remains at 1.3495 where we have trend line support from the 2012 lows. GBPUSD – while 1.7180 continues to cap the topside, the risk for further gains towards 1.7330 remains, while above 1.7040. 1.7330 is the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. Only a move below 1.6910 support delays the scenario above. EURGBP – the current pullback continues to find selling interest around the 0.7960 area, which had acted as support on the way down. The 0.7880 remains the next target while below the 0.7960 area, with a move through here potentially targeting the 0.8035 area. The pressure remains on the downside while we remain below trend line resistance from the March highs now sitting just below the 0.8055 level. USDJPY – slipping below 101.80 keeps the broader range intact as we continue to play the range between 101.20 and the range highs just below 103.00. 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.