Last week was a tough one for financial markets and the likelihood is that this week is likely to be as equally uncertain and choppy, as investors look towards the next potential flashpoint. The events in China were a timely reminder to investors that all may not be well with the world’s second largest economy, as the authorities attempt to reinvigorate a flagging economy, at a time when economic data in some of its key export markets are also showing signs of flagging. Currency markets in particular will be looking for signs of further weakness in the Chinese currency given the comments by the Chinese central bank at the weekend, which warned markets to expect further two way volatility in the coming weeks. While Chinese authorities aren’t likely to openly admit they want a slightly weaker currency, last week’s actions saw the die cast and it seems improbable that the yuan won’t slowly weaken in the coming weeks, and in the process exercise further downward pressure on global inflation. The latest EU GDP numbers last week when broken down into their component parts, while not exactly terrible, weren’t exactly encouraging either, particularly given that oil prices have been at significantly lower levels for all of 2015, and monetary stimulus has been pretty free flowing for all of Q2. Of particular concern was the sharp slowdowns seen in France and the Netherlands, while Germany was shown to be struggling to get out of second gear. While Greece has undoubtedly been a drag on sentiment, it didn’t stop stock markets posting record highs as recently as April this year, and the focus this week is likely to be on the various votes in EU member parliaments on the latest bailout deal, in order that Greece is then able to receive the funds to repay the ECB on August 20th. In the four months since then we’ve pretty much gone sideways, as the global economy spins its wheels, while central banks all over push ever harder on the monetary accelerator, to little effect. Compound that concern with the fact that the world’s biggest central bank, the Federal Reserve may be tempted to do the monetary equivalent of tapping the brake pedal next month, and it’s not hard to see why investors are a touch nervous, particularly given that inflation remains fairly benign. This week’s key events are once again expected to be focussed on the latest Greek bailout which was approved by EU finance ministers on Friday, and which could well cause some local difficulties for German Chancellor Angela Merkel when the vote goes through the German parliament on Wednesday. The role of the IMF continues to be the source of much speculation, with pressure building on Germany to consider debt relief beyond maturity extensions and lower interest rates. Also on the agenda this week we have some significant UK data, including CPI inflation data, as well as the latest retail sales for July. The recent decision by the Bank of England to leave interest rates unchanged has been well documented with the break of consensus by Ian McCafferty voting for a rise in rates. It is unlikely that we will see any significant rise in price pressures given the sharp falls in commodity prices last month, but there has been some concern that retail sales have been showing some signs of weakness in recent months, as consumers start to worry about a potential rise in borrowing costs. We also have the latest FOMC minutes from the July meeting on Wednesday and given recent comments by the Atlanta Fed’s Dennis Lockhart about the high bar to not raising rates, these will be examined forensically for evidence as to whether anyone else on the committee shares his views, or even appears to be leaning in that direction. One thing is certain, this week’s inflation data from both the UK and the US will feed into the debate as to when either central bank is likely to push the button on a modest rate increase. EURUSD – we still have significant resistance at the 1.1220 area, after last weeks failed attempt to break through the July highs. The 50 day MA is currently acting as support with a move back through 1.1080 retargets the 1.1020 area, while a move through 1.1230 retargets a move towards 1.1450. GBPUSD – the pound continues to sit in a 220 point range between 1.5460 and 1.5680, but the bias does appear to be shifting towards a move higher. The high of the last five weeks at the 1.5680 level remains a key resistance on the upside. A move above 1.5700 has the potential to retarget the 1.5820 level. EURGBP – slid back below the 0.7120 area at the end of last week, which suggests we could see a steeper decline towards the 0.7040 level. Key resistance remains at the 0.7200 area and trend line resistance from the May highs at 0.7480. USDJPY – another failure above the 125.00 level last week suggests we remain vulnerable to a drift lower. As such we could see a move back towards the 123.75 area, and then 123.00. Only above 125.90 argues for a move towards 127.20. CMC Markets is an execution only service provider. 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