After failing to consolidate a move above the 1,900 level earlier this week, the S&P500 and US stocks rolled over slightly yesterday, aided by a sharp drop in US 10 year yields to 6 month lows. This fall in yields suggests that bond traders don’t share the exuberance of equity market investors about the strength of any US economic recovery in Q2, though the slump in yields wasn’t confined to US bonds. This week’s April retail sales data, poor as it was, would seem to suggest that US consumers aren’t ready to let rip on spending quite yet, despite the rise in temperatures as the US comes out of its cold winter freeze. While US markets remain conflicted about the strength of the US recovery, European investors are no less concerned as to the health of the European economy, if this week is any guide, with European markets trying to push on yesterday, but struggling in the manner of a car moving forward with the handbrake on. Disappointing forward looking ZEW data, combined with concerns about falling inflation has raised the prospect of some form of action from the ECB next month, which has helped underpin markets in Europe. Upside progress has remained constrained though with concerns about the situation in Ukraine as sporadic pockets of violent clashes bringing the prospect of a further escalation of tensions as we head towards another weekend. While most in the market seem to expect some form of action from the ECB next month the main unknown remains as to the extent of any such action, with various members of the ECB and Bundesbank keeping investors guessing with respect to their ultimate intentions, and their views as to whether the Eurozone is at risk of deflation, with Bundesbank chief Jens Weidmann significantly less dovish in his comments yesterday than the Bundesbank had been the day before. The key data to keep an eye on today will undoubtedly be the final CPI inflation numbers for the EU area, after yesterday’s German and French numbers painted a rather mixed picture. While German CPI remained at 1.1%, French CPI came in at 0.8%, which would seem to suggest that today’s broader final EU CPI measure could well edge up to 0.7% with core prices remaining at 1%. We will also get preliminary Q1 GDP data for a number of countries in the euro area including EU Q1 GDP data. The day starts off with Q1 GDP numbers from France and these are expected to confirm France’s economy as the new problem child of Europe and show a significant slowdown from the Q4 numbers with meagre growth of 0.1% expected. If the numbers come out as expected, the pressure on Francois Hollande’s reshuffled government, from the EU and Germany is particular, is expected to increase to implement the necessary changes and reforms to kick start the struggling French economy. Germany on the other hand is expected to improve to 0.7%, from 0.4%, while Italy is also expected to show improvement to 0.2% in Q1 from 0.1% in Q4. The broader EU GDP measure is expected to improve to 0.4% from 0.2%, driven largely by the improvement in the German number. Any disappointment in any of these numbers is likely to reinforce the likelihood of action whether inflation improves or not. EURUSD – another tight range yesterday with the euro so far unable to climb back above the 100 day MA at 1.3745, but it remains above the April lows at 1.3675. A break below 1.3650 is needed to signal the potential completion of a double top reversal pattern and trigger further declines towards the 200 day MA at 1.3620 initially, and then the February lows at 1.3480. We need a move back through 1.3780 to stabilise and retarget 1.3850. GBPUSD – yesterday we saw the pound fall below the 1.6820 area, falling back to the 1.6755 area matching the April lows, with the next support at the 50 day MA at 1.6720. We need to recover back through 1.6900 to mitigate this scenario. We also have trend line support at 1.6710 from the November lows of 1.5855. EURGBP – the euro rebounded from new one year lows at 0.8128 yesterday touching 0.8185 as the pair closes in on the 0.8090 level and the 2013 lows. We need to see a rally beyond the 0.8250 area to diminish the downside risk and open up a retest of the 0.8300 area. USDJPY – having peaked at 102.38 this week the US dollar fell back below the 102.00 area, as we continue to trade in a range with support coming in at 101.50, the March low at 101.20 as well as the 200 day MA at 101.00. We need to see a recovery back through the highs this month at the 102.80 level to suggest a move back to the highs at the beginning of April at 104.10. CMC Markets is an execution only provider. 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