The weekend pledge by G20 leaders to boost the global economy by an additional collective 2% of GDP by 2018, would ordinarily be a source for optimism, but history has taught us that away from the harsh glare of the world media, the rhetoric soon gives way to local political expediency, as politicians once again worry about getting elected, and put their priorities elsewhere. The communiqué pledged to put in place major investment initiatives which would be reviewed by the OECD and the IMF. Time will tell whether this G20 meeting is any more successful than previous ones, but it if history has taught us anything in recent years, it pays to keep expectations, to coin a phrase, fairly anchored. The divergence between European markets and US markets continued last week with US benchmarks once again hitting record highs, while their European counterparts struggled to make headway. The FTSE100 was a broad exception posting its fourth successive positive week, but overall it was a rather indifferent week for German, French and Italian markets, despite some better than expected Q3 GDP numbers. This reaction may have been borne out of some small realisation or an expectation that last week’s GDP and inflation data could well prompt inaction from the ECB at next month’s policy meeting. While some in the markets are still expecting the European Central Bank to announce further measures at the next council meeting in early December, the likelihood of it happening appears to have receded somewhat. To look at the reasons why you only have to look at the Q3 growth numbers for Greece, Portugal and Spain which have all showed above average levels of economic growth. Greece posted Q3 GDP growth of 0.7%, while Portugal grew 0.4% and Spain is growing at 0.6%, which will reinforce the narrative that structural reforms while painful, are finally delivering a turnaround in the fortunes of the countries that have delivered them. With Germany also avoiding a technical recession it will be increasingly difficult for the doves on the ECB governing council that more measures are needed in the short term, and in the process increase the pressure on France and Italy to get a move on with their own economic reforms. European trading this week looks set to continue the weaker theme this morning as we get set to open lower after economic data showed that Japan slipped back into recession as the economy contracted 0.4% in Q3, underlining the recent decision by the Bank of Japan to increase its stimulus program. The major focus this week is likely to be on the latest UK inflation and retail sales data, as well as the latest Bank of England minutes, which given the recent weakness in some of the latest economic data and last week’s rather dovish inflation report, could well prompt a change in the voting patterns on the MPC. Will one of the two hawks on the committee reverse their call to hike rates? Also on the agenda is the latest Fed minutes after last month’s unexpectedly hawkish statement caught the markets by surprise. In Europe the main focus will be on tomorrow’s German ZEW sentiment survey, while markets will later in the week be focusing on the preliminary November manufacturing and services PMI data from France and Germany, with Germany set to remain apart from the French numbers which are again expected to be poor. EURUSD – the failure to push through the 1.2400 level on Friday saw a sharp rebound above 1.2500 and could well presage a move towards 1.2570/80, which we need to get above to suggest a move towards 1.2800. Support remains at the recent lows at 1.2355 but while 1.2400 holds the prospect of a move towards 1.2040 look limited in the short term. GBPUSD – the break through the 1.5720 area and last week’s low at 1.5593 is a very negative development for the pound. This break of the 61.8% retracement of the entire 1.4810/1.7195 up move suggests further sharp declines towards 1.5430 initially. The 1.5720/30 level now becomes an important resistance level along with the 1.5820 area. EURGBP – the sharp rally seen in the last couple of days has seen the euro punch through some significant resistance levels but we’ve thus far managed to hold below the 0.8000 level. The big resistance level currently sits near the September and October highs as well as the 200 day MA between 0.8050/60. Support now comes in at the 0.7940 level. USDJPY – last week’s short term selling interest just above the 116.00 level proved somewhat short lived as the momentum trade continues to build for a move towards 120.00, with a high of 116.82 last week. Given the recent strength of the up move it’s not unreasonable to expect a pull back before a move higher to 120.00, unfortunately picking a potential turning point is proving difficult, with support now at 113.80 and last week’s low. 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. 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