US stocks endured a somewhat turbulent session yesterday after disappointing retail sales numbers for June cast further doubt over the strength of the US recovery in Q2, though Empire manufacturing posted some strong numbers to partially offset that disappointment. Despite the mixed data the Dow managed to post a new record high and close, on the basis that the economic data remained sufficiently mixed to keep rate rise expectations in check, though the Nasdaq did finish slightly lower. Fed Chairman Janet Yellen caught stock markets by surprise yesterday by indulging in a spot of stock picking, or should that be stock kicking, by suggesting that perhaps some sectors were starting to see rather stretched valuations. She pointed out small cap, biotech and social media stocks as particular concerns, "…equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched, with ratios of prices to forward earnings remaining high relative to historical norms" she said. I know Yellen has her critics on Twitter, but is shooting the messenger the best way to get your own back I wonder? The Fed Chairman went on to be typically evasive when it came to the timing surrounding any potential rise in rates, though she did throw the hawks a small bone by suggesting that rates could rise quickly if the jobs data warranted, but she tempered that with a remark about weak wage growth, echoing another central banker this side of the Atlantic. While US markets continue to make new highs European equity markets are starting to diverge, with more declines yesterday, though we can expect to see a positive open again today, after the latest China data pointed to a slight improvement. China Q2 GDP came in at 7.5%, while industrial production for June rose by 9.2%, and retail sales came in at 12.4%, Economic data once again from Germany has served to limit the upside yesterday as concerns grow that a slowdown in Germany could start to see stocks buckle under their own weight. Events in Portugal continue to keep investors nervous as Espirito Santo shares continue to get hammered, amidst concerns about a possible default on a €900m investment that Portugal Telecom holds with Rioforte, a subsidiary of the bank. Yesterday's surprise jump in the rate of UK inflation to 1.9% in June has inevitably reignited speculation about the prospects for a rate hike before the end of this year. I suppose that's inevitable given the current fixation about when rates are likely to rise, but it ignores a number of key factors with respect to the UK economy. First and foremost Bank of England governor Mark Carney has insisted that any decision will be driven by the data and given Carney's comments on the 24th June where he expressed concern about the lack of wage inflation, it is hard to imagine a scenario where the bank would countenance an increase in rates when the gap between wages and inflation remains as wide as it currently is at 1.3%, notwithstanding some concern about recent disappointing economic data from the manufacturing sector. Today's average earnings data for May is expected to show a further drop from the 0.7% rise seen in April to 0.5%, widening the gap further. It would also seem that UK consumers are starting to rein in spending if yesterday's drop in BRC June retail sales by 0.8% is anything to go by. There is some good news expected with ILO unemployment set to fall further in May from 6.6% to 6.5%, while jobless claims for June are set to fall by 27k, the twentieth successive monthly decline in a row. EURUSD – still in the overall uptrend since the 2012 lows. The broader range remains intact and while we hold above the 1.3500 level, the risk of a move back towards 1.3700 remains more likely. The key support remains at 1.3520 where we have trend line support from the 2012 lows. GBPUSD – yesterday's brief push to new six year highs at 1.7192 turned out to be a fairly brief affair as we quickly slipped back again. This failure to push through 1.7200 keeps the risks to the downside the pound and a return back to the lows at 1.7055 meaning that we could still get a move back through 1.7040 towards 1.6910. Only a move above 1.7180 would undermine this scenario and run the risk for further gains towards 1.7330. 1 7330 is the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. EURGBP – this weeks move above the 0.7960 area ran out of steam at 0.7980 short of the 0.8000 level as we headed back towards the longer term target at 0.7880. While below trend line resistance from the March highs, at the 0.8035 area, the pressure remains on the downside. USDJPY – only a move through 101.80 targets a move towards 102.10 and remains a key pivot within the broader between 101.20 and the range highs just below 103.00. Intraday resistance sits at 101.80. CMC Markets is an execution only 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. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.