After yesterday’s sharp falls in European markets we look set for a positive open as investors weigh up the prospect of further losses, against the backdrop of continued uncertainty surrounding Greece, and the latest Chinese services PMI data, which came in at a four month high of 52.9, slightly below expectations, but above March’s 52.3. With Greece set to make another €200m payment to the IMF today, the clock continues to tick down towards the time when the country eventually runs out of money. For quite a while now the generalised narrative out of Brussels has been that it has been the Greek government holding up the process of coming to an agreement with its creditors, however the recent news flow out of EU headquarters suggests that the truth may be more nuanced than that, with splits between the various creditors now coming to the fore. These splits got an airing yesterday on reports that the IMF had reportedly stated that EU creditors needed to consider some form of debt restructuring in order to make Greece’s debt load sustainable. Talk of splits between the EU and the IMF were given added credence by Greek officials yesterday, who blamed them for the debt deadlock. These claims were rebuffed by German finance minister Wolfgang Schaueble, when he stated that the IMF had not stated that a Greek debt cut was needed, but it was hard to escape the perception that Mr Schaueble was trying to paper over some very large cracks. Irrespective of who said what and to whom, it is becoming increasingly apparent that no agreement is likely to be reached by May 11th, and with a €750m payment due on the 12th, it is hard to see where any agreement could come from. With proceedings already difficult and fraught with respect to Greece’s so called red lines, the last thing markets need to hear about are divisions between the EU and IMF with their own differing red lines, which makes it that much more difficult to envisage any form of positive outcome in the coming days. Earlier this week we saw some fairly positive manufacturing PMI data from Germany, Italy and Spain as the fiscal boost from a lower euro and oil price helped boost these sectors of the economy. This was quite a decent silver lining, but as with all things Europe it came with a cloud, in the form of France and a bigger than expected contraction to 48, down for the 12th month in a row. The hope is that today’s services data for April will be better, though even here expectations for France aren’t particularly high, with a reading of 50.8 expected. Germany, Italy and Spain are all expected to post fairly robust numbers of 54.4, 52.1 and 57.4 respectively. In the UK, the latest April data has been disappointing for both manufacturing and construction, both coming in at multi month lows. The weak numbers have been put down to businesses delaying investment decisions ahead of this week’s electoral vote, understandable given the prospect of a messy and uncertain outcome. This suggests that today’s April services number could be similarly weak, with expectations probably on the optimistic side at 58.6, down from 58.9 in March. In the US we also saw sharp falls overnight as more disappointing economic data, along with a failure to push onto new highs saw stock markets roll over and follow bond markets lower. The worst monthly trade deficit in six years didn’t really help the mood either, as expectations about GDP growth in the first half of this year got revised lower again. In this context of a weakening economy today’s latest April ADP employment report could well act as an important bellwether or signpost to Friday’s more important payrolls number. The overriding belief is that the weakness in March was an aberration for both the ADP number which came in at 189k and the NFP number which came in at 126k. Today’s ADP number is expected to improve to 200k, while a better number will raise expectations of a strong NFP number on Friday. EURUSD – yesterday’s fall back below 1.1100 managed to hold above the 1.1050 support area before pulling back towards 1.1200. This support needs to hold for a move to 1.1500 to unfold. For now the 100 day MA at 1.1280 is the next key resistance, as well as being last week’s high. As long as we don’t drop back below 1.1050 then the bias remains for further gains. GBPUSD – yesterday’s fall and rebound has seen the pound stabilise a little. Having failed at 1.5500 last week we could well slip back towards the 1.5000 level after dropping back below the 100 day MA on Friday. We need to get back above 1.5220 to stabilise. EURGBP – we found support at the 0.7320 area yesterday before rebounding. This is likely to be key support for further gains towards 0.7540, on a break above the 0.7420 level and last week’s high. USDJPY – strong support remains just above the March lows at 118.30, while at the same time the rebounds keep getting shallower. We need to see a break above 120.70 to mitigate the downside risk of a move towards 116.50. CMC Markets is an execution only service 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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