Yesterday’s move higher in equity markets was pretty much predicated on the premise that Russian President Vladimir Putin would stick to his word when he said that Russia had no intention of splitting Ukraine, and would respect the rest of the territorial integrity of the country. While markets may be naïve enough to take these comments at face value it’s hardly likely to sit well elsewhere in the region, and his words might carry more weight if there weren’t thousands of troops sitting on Ukraine’s eastern border, where just miles inside that border there is a strong separatist movement, which could well go on to cause further problems for Kiev in the coming days. There is also the fact that EU and US leaders are hardly likely to sit idly by and do nothing and certainly have room to add further sanctions to the initial list announced Monday, which suggests that the recent volatility in stock markets is likely to continue for some time to come, particularly if further economic sanctions are agreed upon later this week. Away from the Crimea we also have a full calendar of economic events to chew over today as European markets get set to open mixed this morning. We start in the UK with the latest ILO unemployment numbers as well as the Bank of England minutes and the latest budget. Today’s budget is unlikely to change sentiment too much with respect to the overall trend in the pound given how much it tends to be a case of financial sleight of hand as money gets moved around like pieces on a chessboard. They very rarely tend to be game changing events and this week is likely to be no different, given how close we are to next year’s general election, and the lack of room the Chancellor has in partaking in some cheap giveaways. The markets are likely to be more interested in the latest minutes from the Bank of England meeting and the latest ILO unemployment data. The unemployment rate is expected to remain steady at 7.2% while another sharp fall in monthly jobless claims is expected of 25k. Of particular interest will be the average earnings data which looks like it could well be starting to edge back higher again and converging with the official inflation data after months of diverging away and squeezing consumer’s real incomes. A rise of 1.3% is expected for the three months to January. The latest Bank of England minutes are expected to highlight sharp divisions between policymakers about the amount of spare capacity in the UK economy, with Martin Weale in particular at odds with Mark Carney as to the amount of spare capacity in the economy. This divergence of views was highlighted at the Treasury Select Committee over a week ago, and was a surprise given that previous minutes had suggested that there was a broader consensus about policy amongst MPC members. If this week’s published minutes are to be treated as in any way credible they should reflect last week’s testimony differences, and if they don’t it begs the question as to what use these minutes really are. Later on in the day we have the latest FOMC meeting and Janet Yellen’s first press conference as Fed chief. Despite the recent weakness in US economic data it is unlikely to be enough to stop the course of the next $10bn taper of Fed asset purchases. With US 10y treasury yields currently trading in and around 2.7% the opportunity to continue to pull back, are akin to pushing at an open door. Any pause in tapering could well signal to the markets that the Fed is concerned that the economy is weaker than they have currently admitted and it is in this context that the new economic forecasts and guidance thresholds will be closely monitored. EURUSD – the euro continues to find dips well supported but needs to push through the highs last week at 1.3970 to push on through the 1.4000 level. The 1.4000 level remains a key psychological barrier to a move towards 1.4200, while only a move back below 1.3810, has the potential to retarget a move back towards the February lows via trend line support at 1.3770. GBPUSD – a rebound from the 1.6540/50 level yesterday has prompted a rebound but the rallies are getting shallower, suggesting we could get a slow move lower back towards 1.6480 and even 1.6300. We need to get back above the highs last month at 1 6820 to suggest a stronger move towards 1.7000. Only a close above 1.7000 could have huge significance in the coming weeks for the future direction of the pound. EURGBP – while above the 0.8350 double bottom break out level the likelihood of a move towards the 200 day MA at 0.8425 remains. Support now comes in at the 0.8350 level and below that in the 0.8320 area. USDJPY – the pressure remains on the downside despite the support at 101.20 of the last two weeks. The focus still remains on the February lows at the 100.70/80 level. The 200 day MA is also a key level at 100.35. We need a move back through 102.70/80 to stabilise and argue for a move back towards 103.30. 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. 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