In a choppy session at the end of last week European stocks finished the day sharply lower on reports that Ukrainian forces had fired on a Russian military convoy partially destroying it, in what can only be construed as a serious escalation of events. Adding to the uncertainty Ukrainian forces, over the weekend appear to be turning the screw on separatist forces in Lugansk as reports filter through of significant advances in this region. While Russia continues to persist in denying any role in arming the rebels their case was undermined by separatist leaders claims that they were indeed doing just that, and while European officials continue to push the case for peace, the fighting goes on, and could well act as a significant brake on any upside this week. That being said the rebound from the lows in US markets late on Friday, once again suggests that investors think that any fall-out is likely to be contained, and this belief is likely to see European markets open higher this morning as investors try and maintain a focus on the economic fundamentals and a number of key macro-economic events this week. Away from geopolitics the focus this week is likely to be on the latest minutes from both the Bank of England and the Federal Reserve’s most recent meetings, followed by the annual Jackson Hole symposium of central bankers. We already know there was a dissenter at the last Fed meeting, but we don’t, as yet know whether there was any dissent at the most recent Bank of England rate meeting, and this week’s minutes will shed some light on that. Before last week’s Bank of England quarterly inflation report expectations were high that there could well have been some dissent, but the surprisingly dovish nature of the press conference, and adjustments to the banks forecasts, has thrown that belief into some doubt. Mark Carney’s comments with respect to wage growth and the probability of a rise in rates caught the markets off guard and put back expectations of a rate rise back into 2015. Once again though the waters were muddied further at the weekend when Bank of England Mark Carney rowed back on his comments from last week by claiming that he didn’t necessarily need to see a turnaround in wages growth in order to raise rates. Last week the governor of the Bank of England and the MPC were accused of being clueless on a scale of certainty and cluelessness about the state of the economy, which prompted Carney to respond that the range was probably between perfect certainty and perfect uncertainty. Those weekend comments will only add to the perception of a conflicted central bank. In fact it would appear that the only thing Mr Carney and the MPC are increasingly certain of, is that the outlook is uncertain, and that they have no more of a clue than the rest of us, which isn’t exactly comforting. If this is the case it would certainly account for the mixed messages, which is keeping the markets off balance. Tomorrow’s inflation numbers are expected to reinforce the divergence between prices and wages, and for that reason alone a rate hike this year remains unlikely, whatever messages the Bank of England sends out. Maybe the markets should focus on that, rather than the comments of MPC members and the Bank governor? At the end of the week we have the annual Jackson Hole symposium of central bankers where the theme is “Re-evaluating Labour Market Dynamics” and given the recent weakness seen in European economic data, a lot of attention will be on ECB President Mario Draghi’s speech late on Friday particularly if this week’s preliminary manufacturing and services PMI data for August from France and Germany continue to point economic weakness. EURUSD – still looking well supported above the lows at 1.3333, but also continues to struggle above 1.3400. Until we are able to take out the previous lows at 1.3333, the risk of a short squeeze remains. The main resistance remains at 1.3475, which we need to overcome to target a stronger rebound. Below 1.3300 targets 1.3225. GBPUSD – the pound has found support for now at the 200 day MA at 1.6655, but does appear to be finding a bit of a short term base, after gapping higher in Asia overnight. A daily close below the 200 day MA could well signal further losses towards1.6520. To stabilise the pound needs to push back above 1.6760 and last week’s low. EURGBP – if we manage to hold above the 0.8000 level we could push towards the 0.8085 area. A fall below 0.7995/0.8000 could see a dip to 0.7970 initially, with support also at 0.7920. USDJPY – there is nothing to suggest though that we won't continue to trade within the broad range that we've been in over the last six months. We have resistance at 103.00, and support at 101.20. 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. 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