Having been shaken by geopolitical concerns in recent days stock markets appear to be staging a bit of a comeback as events in Ukraine, while not abating, appear to be becoming a little more predictable, though haven bond yields still remained fairly depressed, with UK, US and German yields hitting their lowest levels this year as investors hedge their bets somewhat, just in case we get a sudden change in events. A deterioration in economic data also appears to be pushing investors back into stocks as markets bank on central banks keeping rates lower for longer, particularly after US retail sales for July came in below expectations for the third month in a row, while Chinese economic data also disappointed, as new lending to the economy more than halved in July. Both European and US stock markets finished higher yesterday with Europe finding support from another disappointing EU July industrial production number, which showed a contraction for the second month in succession. Investors appear to be betting that the continued raft of disappointing economic data could compel the European Central Bank to take further steps to help try and boost economic activity before the end of the year, while recent weakness in US and UK data has put back expectations of a potential hike in rates back into the early to mid-part of next year. The pressure for further action from the ECB could well get reinforced after today’s economic data with the latest Q2 GDP numbers from both Germany and France. Expectations surrounding these numbers have declined sharply in recent weeks with French GDP expected to show a slight expansion, at best, of 0.1%. Of more concern is the expected stagnation of the German economy with a worst case scenario of a 0.1% contraction in Q2. The broader EU measure of GDP is expected to show a 0.1% rise in Q2, down from 0.2% in Q1, which seems rather optimistic given the low expectations surrounding the equivalent German GDP number. These numbers, if they come in broadly as expected shouldn’t really move the dial that much, as they should already be priced in, but the final EU CPI inflation numbers for July might well have an effect, particularly if they reflect the deteriorations seen in this week’s Spain, Italy, Portuguese and France CPI numbers. A further drop from the flash CPI number of 0.4% of last week is likely to fuel fears that Europe is heading down the deflationary plughole, despite various ECB members insistence that they have no deflationary concerns. Poor numbers are also likely to widen tensions between Germany and France after Bundesbank chief Jens Weidmann’s comments to Le Monde yesterday, where he dismissed deflationary concerns and urged France to pull its finger out and start setting an example on budget matters. Despite investor expectations of possible further action it remains highly unlikely that the ECB will take any further steps, until the TLTRO program has been given time to work. Given that this program only starts next month, markets are likely to be disappointed in their expectations of any form of QE, before 2015. EURUSD – we saw another push above 1.3400 yesterday but failed to overcome the highs last Friday at 1.3430 and have since slipped back. Until we were are able to take out the previous lows at 1.3333, the risk of a short squeeze remains. The main resistance remains at 1.3475, which we need to overcome to target a stronger rebound. Below 1.3300 targets 1.3225. GBPUSD – the downside gave way with a vengeance yesterday, dropping through support at 1.6755 and dropping down to the May and June lows at 1.6690. There is also support at the 200 day MA at 1.6655, and a daily close below here could well signal further losses towards1.6520. To stabilise the pound needs to push back through 1.6760 and last week’s low. EURGBP – the euro appears to have found a short term base for now and having pushed through the 0.8000 level now needs a move through 0.8030 to target 0.8085 the May lows. Downside support comes in at 0.7920 and the lows last month at 0.7874. USDJPY – indecision remains the primary driver here as the US dollar continues to remain range bound with resistance at last week’s highs at 103.00/10 and support in the mid 101’s. There is nothing to suggest though that we won't continue to trade within the broad range that we've been in over the last six months. We have resistance at 103.00, and support at 101.20. 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.