Last night’s market reaction to the latest Fed minutes can only be described as undecided, with US markets initially rallying strongly with the S&P500 setting another new record, before closing more or less unchanged, as investors tried to establish whether the minutes could be construed as hawkish or dovish. The reality is the minutes offered nothing new with respect to the timing of when the Fed would be likely to move on rates. The decision to judge the data on its merits, on a meeting to meeting basis has left US markets wobbling around unsteadily like a child on a bicycle, which has just had its stabilisers removed, trying to keep its balance. As expected a number of committee members did appear to be having doubts about the strength of the US recovery, but there remained an expectation that the economic weakness seen in Q1 would be transitory in nature. The one takeaway that can be taken from last night’s minutes is that while a few members did think a June rate hike was appropriate for a move on rates, they were outnumbered considerably by those who didn’t, and given the weakness in the more recent economic data the arithmetic to that equation is not going to change, meaning the June rate hike option is dead in the water. The main takeaway would appear to be that the Fed has no more of an idea as to when rates are likely to be raised than the rest of us, with a number of different views being expressed. It was clear though that the strong US dollar is a concern as well as the ripple out effects of the fall in the oil price on investment spending. Markets in Europe closed higher yesterday despite rising concerns about a Greek default grew after a couple of senior Greek officials raised the prospect of missing the June 5th IMF repayment if agreement was not reached by the end of this month. A warning about the prospect of capital controls from ratings agency Moody’s only served to reinforce those concerns, though there was some positive news with the ECB raising its ELA limit by €200m, to €80.2bn and keeping the collateral haircuts unchanged. On the data front we are due the latest preliminary manufacturing and services PMI numbers for France and Germany for May with some concern that the recent recovery seen in some of the Q1 data could start to plateau in Q2. France continues to remain a worry, in particular its manufacturing sector with a slight improvement to 48.5, from 48 expected. A modest improvement in services to 51.9 is also expected. Germany is expected to remain fairly steady with manufacturing at 52 and services at 53.9, with the biggest concern being that the recent rebound in the oil price could pinch off some of the recovery seen in Q1. In the UK the latest Bank of England minutes offered little in the way of clues about the prospects for interest rates, aside from the fact that they weren’t likely to rise this year. Some of the more recent economic data prior to the recent election vote had pointed to a little bit of a slowdown, probably as a result of uncertainty ahead of the vote. The services sector, however has continued to show resilience, though we did see a sharp slide in retail sales and consumer spending in March, largely as a result of falling fuel sales. Today’s expectation for UK retail sales is for April to see a bit of a bounce back, but that is by no means certain given the uncertainty we saw ahead of May’s election, about the possible outcome. Last week we saw the BRC retail sales numbers for April show a 2.4% decline, so there is certainly a case for exercising caution with respect to market expectations. These are for a rise of 0.4%, a rather tepid rebound after March’s 0.5% decline. EURUSD – currently finding support just above the 1.1050 level which needs to hold for the current rebound to maintain its momentum. Only a fall below the 1.1050 level negates the current upward momentum for a move towards 1.2000. GBPUSD – after the double failure above 1.5800 and the fall below the 200 day MA at 1.5600, setting us up for test of the trend line support at 1.5460, from the lows in April. The speed of the decline is worrying and a break below 1.5420 could well see further losses towards 1.5000. EURGBP – the euro appears to be trading in a range for now with resistance just below the 0.7300 level and strong support down near the lows last week at 0.7115. USDJPY – we’ve seen the US dollar overcome the April highs at 120.85 bringing it close to a retest of the highs at 122.00. We also need to be aware of trend line resistance at 122.15 from the 1990 highs at 160.30. Support remains near the recent range lows between 118.30 and 118.65. 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