We saw another positive session for European stock markets yesterday with a strong finish for the FTSE100, while German and French markets also posted gains for the second day in a row, putting aside political concerns about the prospects for a new French government, as well as rising tensions between Ukraine and Russia, after Ukrainian forces captured several Russian paratroopers who had “accidentally” strayed across the border, and in the process proving once and for all that Russia continues to disregard its neighbours territorial integrity. The market reaction to the fall of the French government, as well as continued concerns about what is going in on Ukraine and Russia, appears to reinforce the modern day truth that investors react more to what central banks might do, rather than to political uncertainties, or any other external considerations. The incoherence of French economic policy remains nothing new, hence the sanguine market response to the collapse of the government on Monday, though it could be argued that the new government is hardly likely to be much worse than the old one. Markets at the moment are more interested in the change of tone from Mario Draghi at Jackson Hole last week, with respect to the prospect of further measures to help boost the economy in Europe. The prospects for further measures will be tested later this week with the release of the latest unemployment numbers and inflation figures, which are expected to reinforce the narrative of a looser for longer monetary policy. Investors should be warned though, that talking about further easing is totally different to actually doing it, and the bar remains significantly high given German opposition to any form of QE, let alone questions about the legality of it under the terms of the German constitution. While the S&P500 continues to remain resilient, pushing above the 2,000 level the US consumer continues to show symptoms of being anything but. Over the past five months we’ve seen consumer confidence glide higher on an upward path, yet seen little in the way of evidence of this renewed confidence in rising consumption in the form of retail sales, personal spending or durable goods orders. Yesterday’s rise in consumer confidence in August from 90.3 to 92.4, to a six year high doesn’t really tell us anything, given that since March, retail sales have grown at a slower monthly rate for five months in a row, registering no growth at all in July. Even though we saw durable goods for July rise 22.5% this number was distorted by the Farnborough Air show and a large number of aircraft orders which inflated the figure hugely. The core number showed a 0.8% decline suggesting that the appetite for big ticket items remained subdued, a fact reinforced by US retailer Best Buy’s latest quarterly sales numbers yesterday which again showed a decline in quarterly sales. If Best Buy was alone in this slowdown in sales it would probably be easier to ignore but Target and Wal-Mart, both large US retailers, have also reported slowing sales numbers in the past month, as well as warning on the outlook for earnings in the coming months. EURUSD – the euro has continued to probe new lows pushing below 1.3200 and could well be on its way towards the 1.3000 level, which would be a 50% retracement of the move from the 2012 lows at 1.2042 to the 1.3993 highs earlier this year. Any pullbacks are likely to find resistance around the 1.3330 area which were the 6th August lows. GBPUSD – the pound slid back yesterday reversing Monday’s gains closing below the April lows at 1.6555, but it has so far managed to stay above the 1.6520 level which remains a key support. Having declined for seven weeks in a row the 200 day MA at 1.6675 remains a key resistance and we need a close back above it to diminish the downside risk. EURGBP – the euro continues to come under pressure but has so far managed to stay above 0.7950, trend line support from the recent lows. A move through here is likely to see a retest of the previous lows at 0.7880. Above 0.8030 retargets the 0.8085 level last seen in June. USDJPY – the US dollar continues to remain fairly well supported below its recent peaks at 104.28 and is currently finding support around the 103.70 area. The next resistance sits in the 105.50 area which remains a huge level given it was the recent high from the end of last year, as well as the 61.8% Fibonacci retracement of the decline from the 2007 highs at 124.13 to the lows 75.58 in 2011. Pullbacks are likely to find support around 102.80/103.00 area where we saw the May and June highs. 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.