It looks like another positive start for Europe today after yesterday’s positive reaction to the latest German ZEW survey indicated that the declines seen in investor sentiment over the last ten months were starting to turn around, and optimism was returning to the German economy. This also translated across the Atlantic to some more new all-time highs on the S&P500 and the Dow Jones, which also benefitted from another big ticket M&A deal, this time involving healthcare giants Activis and Allergan, as the US biotech and healthcare sector continued to outperform the wider market. The previous Bank of England minutes were characterised by two dissenting hawks in the form of Martin Weale and Ian McCafferty who were both arguing for a small rise in interest rates by 0.25% to 0.75%. Given some of the recent weakness in the latest economic data there might be an argument for either one of these two dissenters or both to modify their stance, particularly in light of last week's unexpectedly dovish quarterly inflation report. Last week's inflation report saw the Bank downgrade both their growth and inflation forecasts suggesting concern about the wider effects of a slowdown in Europe weighing on the UK economy. This change of tone might suggest that the two dissenters might modify their stance but judging by recent comments from both members this doesn't seem likely. As recently as the end of October Mr McCafferty was expressing concern about the diminishing rate of spare capacity suggesting that the economy could withstand a modest tightening, while Martin Weale was arguing that Bank should look through the decline in inflationary pressure in the same way it did when inflation was running in excess of 5%. As such while the overall stance of the MPC is expected to be dovish the voting patterns are likely to remain 7-2 for keeping rates unchanged. While the market has more or less priced out the likelihood of a rise in UK rates until the second half of 2015, the same cannot be said of the U.S. Federal Reserve, where markets are pricing in the prospect of a rate hike sometime in Q2. This may be somewhat premature as it ignores the fact that the FOMC also has an inflation mandate, and like the Bank of England, it is missing it well to the downside. For now the market doesn't appear too perturbed by this but it seems quite likely that a U.S rate rise may well also get deferred in spite of the unexpectedly hawkish statement from the last Fed meeting. The end of the taper was accompanied by a statement that also suggested that the amount of the slack in the labour market was also starting to diminish, with the only dissent on the dovish side from Minneapolis Fed's Naranya Kocherlakota who wanted to continue with $15bn of QE. Today's minutes are likely to give us some colour on that, as well as any debate about the timing of any rate rise. We could also find out whether Fed members discussed how they would finesse market expectations with respect to preparing the markets for a potential change in policy. This is likely to be extremely important given last month’s astonishing volatility in the US bond market that saw yields seesaw sharply in a record 30 point range in a day. EURUSD – the 1.2570/80 area is capping for now but the risk is that we could well break higher with strong support at the 1.2400 level. This remains a key support and obstacle to further declines towards the 1.2355 level and the 1.2040 lows. Above the 1.2570/80 area could well prompt a sharp move towards 1.2800. GBPUSD – the pound continues to look weak and while below the 1.5720 area the focus remains on the downside and the prospect of a move towards 1.5430. Last week’s low at 1.5593 could act as an element of support but 1.5580 is probably a better support area. The 1.5720/30 level now becomes an important resistance level along with the 1.5820 area. EURGBP – yesterday’s break through the 0.8000 level has elicited a push higher towards the big resistance levels at 0.8030 as well as the September and October highs and the 200 day MA between 0.8050/60. The 0.8000 level should now act as support along with the 0.7940 area. USDJPY – the yen continues to remain weak and choppy with an outside range day on Monday but we still appear to look as if we could move higher. The US dollar still appears to be well supported for its move towards 120.00 on the dips with 115.40/45, the low this week likely to be a key support. 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