While European markets had a fairy weak session yesterday, hit by weaker European economic data, as well as concerns about the situation in Iraq driving up oil prices. US markets found the downside somewhat more constrained, despite stronger than expected housing and manufacturing data, and closed only slightly lower. Yesterday's declines would appear to be driven by signs that the recovery in Europe appears to be running out of steam, and despite this month’s easing measures by the European Central Bank investor optimism appears to be waning in willing to push markets higher, particularly in the absence of better economic data, or more robust action from the ECB. Yesterday's French PMI data was disappointing, but that wasn't unduly surprising, but what was more concerning was that the equivalent German data also fell short, suggesting that the German economy is starting to lose momentum as we come to the end of Q2. This perception could receive added weight this morning if the latest IFO Business climate survey for June, shows similar weakness to the recent ZEW survey, and continues to decline from previous months readings. Expectations are for a reading of 110.3, down from the previous 110.4, which would suggest that German businesses aren't too confident that this month's action by the ECB will help. While the European economy continues to tread water, the data coming from the UK economy continues to remain upbeat, so much so that only a few days ago Bank of England Governor Mark Carney stood his recent much vaunted forward guidance on its head by declaring that markets were currently underestimating the possibility of rate hike this year. Last week’s Bank of England minutes expressed surprise at this belief with no sense of irony at all, given policymakers had been insisting as far back as last October that rates weren't going up any time soon, and that there remained plenty of slack in the economy, which needed to be used up before rates moved. This unexpected change of tone not surprisingly caught markets on the hop and has seen the pound rally strongly, given that it appears to mark a distinct change of tone from the central bank. Today Mark Carney, as well as Bean, Miles and McCafferty will be testifying to the Treasury Select Committee and it is hoped that MP's will ask the question that everyone in the markets wants to know the answer to. Why the sudden chameleon like change from dove to hawk about the prospect of rate hikes? Mark Carney's response to this question if it is asked, and it would be incredible if it were not, could well see the pound continue to rise towards 1.73, or slip back towards 1.6900. The likelihood is that Carney will try and balance his remarks about any rate rise being data dependant, and given that inflation is falling and wage growth remains weak it is more likely that the market could well be getting ahead of itself on this one. In any event, whatever happens today after the events of the last few weeks, the Bank's policy of forward guidance is looking distinctly shambolic. As new MPC member Andrew Haldane said yesterday, rates will rise only when the economy can withstand it. EURUSD – the euro continues to trade in a range with support still above 1.3500, though last week’s move above 1.3600 ran out of steam at 1.3645. Nevertheless the risk remains for a move towards 1.3675, while above Fridays low at 1.3560. We also have key trend support from the 2012 lows at 1.2045, which now comes in just above 1.3465. GBPUSD – last week saw the pound close above 1.7000 for the first time since 2008, with the risk for a move towards 1.7330 the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. Ideally we need to see a monthly close above 1.7000 for this to unfold but while we remain above 1.6910, further upside seems likely. We also have intraday support at 1.6990, while the major support lies all the way back at the 100 day MA at 1.6725. EURGBP – the 0.7960 area continues to hold the downside and as such we remain at risk for a pullback towards the 0.8085 area if we sustain a move above 0.8035. Support remains near the lows at 0.7960 and while this holds we remain at risk of a further pullback, with a slightly bullish daily candle last week. The pressure remains on the downside while we remain below trend line resistance from the March highs sitting just below the 0.8110 level, with a longer term target at 0.7880. USDJPY – still in a range with support around the 101.60 area and the 200 day MA, with a move back through the 200 day MA needed to retarget the range trade lows of this month near 101.00. The range highs remain anywhere below the 103.00 area and last week’s high at 102.75. 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.