For all yesterday’s optimism that a Greek deal might be in the offing, the fact remains that each sides starting position has barely budged from the beginning of the negotiations all the way back in March. As a result of Monday night’s high level political pow-wow in Berlin, between Messrs Lagarde, Merkel, Hollande, Draghi and Juncker, the IMF appears to have put to one side for now its scepticism about the budget surplus targets being asked of Greece, though it continues to press the EU about some form of debt restructuring. The new deal is expected to be presented today, but given it appears little different in tone or red lines, it seems unlikely that after all these weeks and months of toing and froing between Athens and Brussels that any agreement will be forthcoming. Certainly expectations of a deal by Friday still seem some way off, particularly given the demeanour of Eurogroup leader Dijsselbloem who appeared rather detached about the prospect of a quick solution. The key focus today will be whether Athens accepts the newly agreed deal outline, having submitted plans of its own earlier this week, with lower budget surplus targets, which it wants to be the basis of any new agreement. There has been some talk on the Greek side of fresh elections in the event the creditors continue to insist on their own solution, while EU commission head Juncker is reported to have requested to meet Alex Tsipras later this evening in an attempt to pull Greece over the line. In a positive sign the ECB raised the ELA by another €500m yesterday ahead of today’s rate decision, and press conference. Yesterday’s rebound in the inflation numbers certainly will have provided food for thought for ECB governing council members. Since the beginning of the year CPI has rebound 0.9%, to 0.3%, while core prices have jumped 0.3% in the space of a month to 0.9%, reducing underlying concerns about deflation risks. Some have argued that the rebound in inflation is the result of the ECB’s QE program, and while that may well be true it doesn’t explains the recovery in prices since December, given the program only started in March. The rebound in oil prices has certainly helped, but it doesn’t explain the sharp rebound in core prices. Draghi’s response in this regard will certainly be worth noting, as will be whether the ECB staff adjust their inflation forecasts upwards in light of yesterday’s data. Before the ECB decision we get the latest services PMI data for May from Spain, Italy, France and Germany. On Monday the manufacturing data was a mixed bag with Spain and Italy outperforming and Germany and France falling short. The latest data is likely to be a similar story with Spain expected to come in at 59.5, Italy 52.8, Germany 52.9 and France 51.6. While all of these indicators are all expected to be fairly positive the unemployment picture is expected to remain cloudy for Italy and the wider EU with Italian unemployment set to remain near 13%, at 12.9%, while EU unemployment is expected to also slip back a little to 11.2% from 11.3%. In the UK the latest services PMI for May is expected to follow on from yesterday’s better than expected construction PMI number, with a slight decline to 59.2 from 59.5, and further assuaging concerns of an election inspired slowdown in Q2. In the US the economic data picture continues to confuse with a worse than expected factory orders number for April. The continued run of disappointing data picture with respect to the US economy, also prompted some caution on the part of Federal Reserve board member and FOMC voting member Lael Brainard, when she suggested that there was a risk that the recent poor economic performance could well last a little longer than anticipated. Tonight’s Fed Beige Book could well offer more clues with respect to the wider health of the US economy in the Fed regions, but before that we get a little peak inside the US labour market with the latest ADP payrolls report for May. April was a disappointing month with 169k new jobs added, the fifth month in a row that the jobs figure had been lower than the previous one. Expectations are for this trend to reverse with 200k new jobs expected to be added. The US trade deficit for April is also expected to narrow from the -$51.4bn in March to -$43bn, while the services ISM for May is expected to slip back to 57.1 from 57.8. EURUSD – yesterday’s break back through 1.1000 and 1.1050 has once again opened up the prospect of a move back towards the May highs at 1.1480. We need to stay above 1.1000 and break through the 1.1220 level for this to unfold. GBPUSD – the failure to push below the 50 and 100 day MA between the 1.5155/65 area has seen a strong rebound. The failure to push lower opens up the prospect of a move back towards 1.5535 and the 200 day MA. EURGBP – yesterday’s rebound stalled out just below the 0.7300 level. Pullbacks should find support around the 0.7230 area, which needs to hold to argue for further gains through 0.7300 toward 0.7380. USDJPY – yesterday’s tap of 125.00 has seen the US dollar slip back and we could see a bit of a pullback having seen a daily reversal candle. A fall below 123.60 could well signal a fall back towards the 122.00 level. 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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