Wednesday’s post Fed minutes pop proved to be relatively short-lived in Europe yesterday as European shares perfected their best impression of a “dead cat bounce”, turning rapidly lower as investors were reminded all too quickly that the timing or otherwise of a Fed rate hike is likely to be the least of their problems in the coming months. Markets quickly saw the placebo effect of the Wednesday night US rally give way to renewed concerns about the German economy after exports plunged 5.8% in August, as well as concerns about the European banking system as Italian bad loans rose to another record, above 20%, and the latest twist in the Espirito Santo saga, reminding investors that Europe's banking system remains a long way from being in a fit state to act as an arbiter of an economic recovery. The hope is that the conclusions of the ECB’s Asset Quality Review will give investors a clearer picture of the main pressure points in the European banking sector. Even so the fact remains that European markets look set to post their third weekly decline in a row as concerns about German and European economic growth continue to erode risk appetite, and send investors scurrying for the exits. Today’s European market open looks set to see European stocks trading at multi month lows, as well as their lowest levels this year, in signs that for all of the central bank help, a healthy recovery continues to remain elusive across Europe. Unsurprisingly the Bank of England let interest rates unchanged for the 67th month in a row, as concerns about a global slowdown prompted the UK Chancellor George Osborne to warn that the problems in Europe could have a chilling effect on the pace of the current UK recovery, in the coming months. We won’t know until the minutes are released in just over a couple of weeks whether or not there was any further discussion about a rise in interest rates, but given the slowdown being seen in some of the most recent UK economic data, it would be surprising if there were any change in the voting patterns from last time. Today’s UK data is expected to show that the trade balance in August improved slightly from -£10.2bn in July to -£9.6bn, though given the weakness of some of the recent August data in Europe this number could well be much worse, particularly if exports disappoint to Europe, which seems likely if this week’s German data is any guide. Construction continues to be a bright spot for the UK with expectations that monthly construction output in August could rise 0.5%, and 2.9% year on year. While manufacturing data in the UK is showing signs of slowing down it’s still better than it is in Europe with the latest numbers from France and Italy expected to be of cold comfort to European policymakers after this week’s awful German data. French industrial production for August is expected to show a decline of 0.3%, though Italy is expected to show a modest rise of 0.5%. Investors will also be focussing on this weekend’s G20 meeting at the IMF with a host of key speakers due to make pronouncements on monetary policy. EURUSD – yesterday’s rebound stalled out at the 1.2785/90 area which was the previous 61.8% Fibonacci retracement of the 1.2040/1.3995 up move. A failure to navigate through this level could well see a return to the 1.2570 level. How we close this week’s candle could well dictate the next move here. Below 1.2570 argues for a retest of the 1.2500 level and then 1.2400. GBPUSD – we got the move to the 1.6220/30 level yesterday before the pound slid back. This remains the obstacle to further gains. If we drop back through the 1.6020 level we remain at a risk of a move back towards 1.5950 on the way to 1.5720. EURGBP – Wednesday’s move to the 0.7900 level could well have been a fake out, as we fell back below the 0.7875 level and drifted lower. The main resistance remains at 0.7930 level and while below here the risk remains for a move back towards 2012 lows at 0.7754 and last week's lows at 0.7765. USDJPY – while 110.00 caps the key reversal day on Wednesday remains valid and as such we could well see further weakness on a break below 108.00, and argue for a test of the 106.20 area in the coming days. 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.