While European stocks closed off their lowest levels of the day yesterday there was still precious little incentive to indulge in any large scale buying due to concerns about the ongoing uncertainty surrounding events in Ukraine, concern about an economic slowdown in China, and the ongoing stand-off between the new Greek government and the EU. The ongoing uncertainty also weighed on US stocks as they closed lower for the second day in a row. This cautious tone looks set to continue this morning after some weak Chinese inflation data raised expectations of a further loosening of monetary policy, with investors also looking anxiously ahead to tomorrow’s Eurogroup meeting, after the new Greek government came out swinging over the weekend, confounding expectations that after a brief honeymoon period, they would water down their demands, or at least be more amenable. If anything the weekend tone was even more defiant, with Varoufakis and Tsipras almost daring EU leaders to push them out of the single currency, by declaring that to do so would cause the euro to fall like a house of cards, leaving EU leaders to contemplate an unpalatable choice. Call the Greeks bluff and force them out, or bow to their demands and then wait for the rest of the bailed out countries to fall in behind them with their own list of demands for debt restructurings and/or budget changes. Against this unpredictable backdrop is it any wonder that investors are choosing to sit on the side-lines and adopt a watching brief. On the economic data front the only data of note is the latest French and Italian manufacturing and industrial production data for December, both of which are expected to show some improvement as a result of the fall in oil prices as well as the recent easing measures from the ECB towards the back end of last year. The French data in particular is forecast to improve by 0.3%, while Italian industrial production is expected to come in flat, down from a 0.3% rise in November. In the UK we can also expect to see small declines of 0.1%, on a month on month basis, in both manufacturing and industrial production data, for December, where the falling oil price could well have had a negative impact on North Sea oil output. The manufacturing sector would appear to have had a disappointing end to 2014, with exports in particular taking a hit from the slowdown in Europe. This morning’s BRC sales numbers are a minor ray of light in this regard showing a rise of 0.2% in January, making up somewhat for a 0.4% decline in December, and in the process highlighting the fact that the UK economy remains no nearer a rebalancing than it was four years ago, in the so called “March of the Makers” budget of 2011. EURUSD – the euro continues to remain under pressure, yesterday’s low at 1.1270 dipping below last week’s low but remaining above the support at the 1.1205 level. The risk of a rebound towards 1.1535 remains while above the 1.1200 level. GBPUSD – we’ve so far managed to remain above 1.5200 and while we do so the risk of a short squeeze back to 1.5280 remains. We need to push back through the 1.5280 level to keep the prospect of a move towards the 1.5500 level. A move below 1.5200 could well see a retest of the 1.5000 lows last week. EURGBP – after failing at the 0.7590 level we appear to be heading back towards the lows at 0.7400. Only a move below 0.7400 suggests a move towards 0.7255, which had originally been the peaks seen in 2003. USDJPY – the broad range between 117.00 and 119.00, remains intact despite overspills either side to 116.55 and 119.22 which book ended either side of last week, with the odds now evenly split between a move lower or higher. The key support remains just above the 115.60 level as well as 116.20, which is also potential neckline support for a forming head and shoulders pattern. On the top side the key resistance sits at 119.25. CMC Markets is an execution only service 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.