Despite the IMF following in the footsteps of the World Bank and downgrading their global growth forecasts equity markets have continued to push higher, driven forward by better than expected Chinese economic numbers for December, a sharply improved German ZEW economic survey, and a widespread belief that tomorrow’s ECB rate meeting will see a significant amount of stimulus unleashed across Europe, as central bankers attempt to offset a deflationary price spiral as oil prices once again started to slide. This rising optimism has prompted the unusual spectacle of European markets outperforming US markets in the past five days with US investors watching bemused from the sidelines, as oil prices slide and the Fed watching from the sidelines. You can almost hear investors salivating at the prospect of an improvement in asset prices as bond yields continue to slide with Spain managing to get €40bn worth of orders for a €10bn 10 year bond sale yesterday, as the dash for trash continues as peripheral bond yields hit multi century lows. It appears that any concerns about the outcome of this weekend’s Greek elections are being put to one side by the prospect of a significant announcement of stimulus tomorrow, with markets pretty much discounting action as a “done deal”, due to the unusually high number of leaks or hints coming from various policymakers in the last couple of days. Let’s just hope Mr Draghi and the ECB don’t disappoint or things could get ugly pretty quickly. On the data front today the calendar is dominated by the UK and the latest wages and unemployment data for the three months to November, as well as the latest Bank of England minutes. As far as the minutes are concerned there shouldn’t be any surprises, though given the continued fall in the inflation rate it could be argued that one or both of the two dissenters on the MPC might feel compelled to reverse their calls for a 0.25% increase in interest rates. Both Ian McCafferty and Martin Weale have dissented at every meeting since August arguing for a rise in rates, arguing that the falls in the unemployment rate will start to translate into a rise in wages. Thus far that hasn’t been the case, with inflation falling back sharply and looks likely to continue to do so with the prospect that we could well see CPI go negative by the middle of the year. Falling oil prices, food prices and now a reduction in gas prices announced this week by the energy companies will eventually filter through as we head past May’s election date. Given this backdrop it seems unlikely that either of them will get the necessary support for a rate increase, with the prospect that any rate rise looks unlikely to come much before the first quarter of 2016. The outlier remains the average earnings numbers for November particularly if they start rising rapidly past 2%, and these look set to start to tick higher rising from 1.4% to 1.7%, a welcome boost to a consumer that has had to endure over 5 years of declining purchasing power as wages lagged behind inflation. The unemployment rate is also expected to come down as well, with expectations that we could see a move under 6% for the first time since November 2008, with a move to 5.9%. EURUSD – momentum continues to favour the downside despite the rebound to 1.1640 on Monday but the risk remains for a rebound while above last week’s low at 1.1465. The key level remains at 1.1205, which is 61.8% retracement of the entire move from the 0.8230 lows and the 2008 highs at 1.6020. Any rebound looks likely to find resistance at 1.1750 and 1.1880. GBPUSD – the pound appears to be ranging for now but we need to see a move beyond 1.5320 to diminish any downside risk. The key support remains at the lows this month at 1.5035, a break of which could see some stops triggered below 1.5000. towards 1.4810. EURGBP – we’ve struggled to rally thus far but the March lows at 0.7590 and this month’s low remain a key support level. We could see a short squeeze towards 0.7755 which is the main resistance, while a move below 0.7590 argues for further losses towards 0.7255, which had originally been the peaks seen in 2003. USDJPY – the US dollar continues to edge higher and we could well be set for a retest of the 120.00 level. The key support remains just above the 115.60 level which is also potential neckline support for a forming head and shoulders pattern. A break of 115.60 could well see a sharp fall towards 110.00.. CMC Markets is an execution only service provider. 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