Having seen European manufacturing PMI’s come in at eighteen month highs earlier this week, today’s it’s the turn of the services sector with the final PMI numbers for November for Spain, Italy, France and Germany, and while the services sector in France could well have been impacted by the Paris terror attacks the initial flash data seen at the beginning of last week showed that business activity in Europe hit a four year high.

Spanish service activity is expected to show an increase to 56.2, Italy to 53.9, and Germany is expected to come in at 55.6. France is expected to come in weaker at 51.3 and possibly below that given recent events. As a prelude to today’s ECB rate meeting this morning’s will show that despite recent dovish talk by ECB President Draghi that the recovery in parts of Europe is economy is showing some decent traction, probably as a result of weak inflation, and not in spite of it. Yesterday’s headline EU CPI number showed that energy prices made a good proportion of the price weakness, and given that these base effects are likely to fall out of calculation in the spring of next year it is hard to make the argument that more stimulus is needed when the current program still has another 10 months to run. That being said markets appear to be pricing in a deposit rate cut of at least -0.2% to -0.4% if German 2 year yields are any guide, as well as a possible increase to the monthly amount of stimulus from €60bn, and an extension to the duration, beyond September 2016. It is highly improbable that Mr Draghi will be able to deliver on all three of these given recently voiced disquiet amongst some ECB members about further measures, which means today’s meeting is more than likely set to disappoint. As with all press conferences the tone will be all important as will the revised inflation and growth projections. Soon after the end of the ECB press conference ends, markets will also have to digest comments from Fed Chair Janet Yellen as she testifies to lawmakers ahead of this month’s FOMC press conference in less than two weeks’ time. Once again she will have to navigate around what appears to be some decent ADP jobs numbers, and this week’s really disappointing ISM manufacturing report which showed that the US manufacturing sector looked to be heading into recession, as it hit levels last seen in mid-2009. Given her comments yesterday it would appear that she has more or less made up her mind about a potential rise in rates, when she stated an increase in confidence that inflation was on its way back to the Fed’s 2% target, while also expressing confidence in the health of the US economy, though she left herself enough wriggle room to row back on that if circumstances changed. This was probably wise given that soon after her comments US oil prices slipped back below $40 a barrel for the first time since August, and could well retest the $37.50 lows. We will also see whether the US services sector is able to take up the slack from the manufacturing sector after a big jump in October. The ISM non-manufacturing number is expected to slip back slightly to 58.1 for November, from 59.1. In amongst all of that we will also be getting the next snapshot of the health of the UK economy in Q4 with the latest services PMI numbers for November. We’ve already seen this week that manufacturing has slipped back a little from its October boost, and the construction sector also suffered a setback yesterday with a slightly weaker reading of 55.3, down from 58.4. Expectations are for a slight increase from 54.9 to 55.1. EURUSD – while above trend line support at 1.0550 the euro remains at risk of a short squeeze with the March lows at 1.0460 also a key support. We need to get back through 1.0720 area to argue for a retest of the 1.0820 area. If we do manage to get back above 1.0830 we could see a run at the 1.0980 area. GBPUSD – yesterday’s drop below 1.4980 suggests the potential for further losses towards 1.4850 in the short term with the next major support at 1.4565, the lows this year. In order to arrest the current downward momentum we need to see a move back above the highs this week at 1.5130. EURGBP – the break above the 0.7080 level suggests we could well be on course for a return to the 0.7150 area. A move back below the 0.7080 area suggests a return to the 0.7000 area. USDJPY – currently finding support above the 122.20 area and resistance at the 124.00 area. Above the 124.00 area suggests the possibility of a move through to the August highs at 125.30. Only a move below the 121.80 area would delay the prospect of this scenario unfolding. 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. 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.