US markets closed broadly flat last night after Tuesday’s strong relief rally, as investors pushed concerns about Ukraine to one side for the moment. The market appeared to shrug off yesterday’s disappointing February ADP payrolls number, as well as the disappointing ISM services number as yet another, weather related miss. While there may be some substance to this conclusion, the same cannot be said about the downward revisions to the previous month’s ADP jobs numbers for October, November, December and January. These jobs downgrades, which reduced the number of jobs added in the 4 months to January by 138k, point to a much weaker US economy than first thought, and as such potential lower trend growth for Q4, as well as the current quarter. If this weakness is also reflected in the US unemployment report on Friday, while it is unlikely to prevent a taper in March, it certainly would suggest that investors might have to consider whether the current rally in equity markets may be a touch overdone. Last night’s Fed Beige Book did offer some comfort by way of pointing to some weather related impact to economic activity, in fact the weather got 119 mentions, but looking past that weather was only cited as a significant factor in New York and Philadelphia. The Fed also said that poor weather acted as a slight brake on jobs growth in Boston, Richmond, and Chicago, though employment levels did show a gradual improvement for most districts. Back in Europe, today’s focus is on this afternoon’s ECB rate meeting, where opinion is split as to whether the ECB will act on rates, or embark on some other measures to try and boost economic activity within the euro area. Speculation has increased as to whether the ECB might act today, because of some remarks that ECB President Mario Draghi made earlier this week with respect to concerns about low inflation becoming entrenched. These comments appear to have prompted speculation about possible action, particularly in light of comments made by the IMF yesterday. There are certainly a number of options being touted, from a nominal reduction in the headline rate to 0.1%, from 0.25%, a negative deposit rate, an end to sterilisation of its SMP bond purchases, another LTRO, some form of funding for lending scheme, or more controversially, full blown QE. The truth is none of these would make much difference in any case given the problem in the euro area is not one of low rates, but simply a lack of demand, as well as a reluctance to lend by banks seeking to boost their balance sheets, ahead of the ECB’s asset quality review and stress tests. The most likely course of action is that the ECB will probably do nothing, given that the economic data continues to improve, and inflation has started to tick higher again, with core prices actually rising to 1% last week, from 0.8%. If the ECB were to cut today when inflation is edging higher it rather begs the question why they didn’t act last month when inflation was falling. For this reason no action seems the most likely course of action given that there has been no material deterioration in any of the data since the last meeting. Whatever the ECB does today, particular attention will be paid to the banks inflation forecasts for 2016, as this could well give important clues as to the timing of any possible action over the coming months. Just before the ECB, the Bank of England will leave monetary policy unchanged, and in so doing mark 5 years of rates at record lows of 0.5%. There is unlikely to be any statement. EURUSD – yesterday’s dip found support at 1.3710, but the rally so far has been fairly tepid, with resistance around 1.3770. The main resistance remains at trend line resistance at 1.3835 from the 1.6040 highs. A break through here could well target further gains towards 1.4000. The euro bias still remains negative while we remain below 1.3835 but the lack of any dip does raise the concern we could push higher. Last week’s low at 1.3640 remains a key support. GBPUSD – yesterday’s rebound keeps the pound within its recent range between the recent lows just above 1.6600 and the highs last month at 1.6820. We need a break either way to determine the next move here. Only a close above 1.7000 could have huge significance in the coming weeks for the future direction of the pound. EURGBP – the negative bias remains for a move back to the lows at 0.8160, while below resistance near the 0.8270/80 area. A drop below 0.8160 targets a move towards the 2010 lows and 0.8065, while a move above 0.8280 targets 0.8320. USDJPY – still range bound for now but while below 102.80 the bias remains for a move towards the recent lows at 100.70 and the 200 day MA at 100.20. A break below the 100.20 level and 200 day MA could well see further losses towards 98.30. The US dollar needs to overcome the 102.80 level to retarget a move back through 103 towards 105.00 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. 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