Having seen an extremely up and down session yesterday European markets look set to open lower this morning after the Federal Reserve looked beyond events outside the US, and pulled the trigger on another $10bn worth of tapering, in the process keeping pressure on equity markets. Events in China aren’t likely to bolster confidence about growth either with the final HSBC manufacturing PMI number contracting further, coming in at 49.5, a six month low. It would appear that the for the first time in three meetings the broad consensus was correct as to the Federal Reserve’s intentions at yesterday’s first FOMC meeting of 2014, and outgoing Chairman Ben Bernanke’s last. Even more importantly the decision was unanimous in tapering by another $10bn to $65bn a month with even Minneapolis Fed Naranya Kocherlakota who dissented last month getting with the program. It also appears that the Fed is prepared to look past the weakness in the last US jobs report of 2013 given the better than expected economic data coming from elsewhere. The consensus also suggests that the FOMC aren’t concerned about deflationary pressures either at this point, or recent volatility in emerging markets. There had been some suggestion that this week’s volatility in emerging markets might have given the Fed pause, but this was never a realistic possibility as it would merely be delaying the inevitable, and would not have sent a good message to the markets. This rare unanimity also suggests that the bar is likely to be very high for the Fed to even consider slowing down the program, and that it is very much data dependent and not influenced by factors outside of the US. Bond markets also took yesterday’s tapering in its stride with yields actually moving lower, not higher as has been the norm. Some have suggested that is because investors are becoming increasingly comfortable with the forward guidance, and while there might be some truth in that, there is also the possibility that the reason yields are falling is because of haven buying of US treasuries due to the turmoil currently roiling emerging markets, in what is a classic “risk off “ trade. The focus is set to remain on the US today with the latest Q4 GDP numbers, and these are expected to show that GDP in Q4 declined slightly from the 4.1% in Q3 to 3.2%. There is a chance that it could come in lower given this week’s shocker of a durable goods number, so be prepared for some fund and gains if it slips back to the 3% level. Personal consumption for Q4 is expected to jump from 2% to 3.7% Weekly jobless claims are expected to remain steady at 330k. Before the US numbers we get to have a look at the latest lending figures for the UK economy, and these will be of particular interest in light of the most recent UK retail sales number for December, which showed a massive jump to 2.6%. Net consumer credit for December is expected to rise from £0.6bn in November to £0.7bn, while net lending to individuals is expected to rise from £0.9bn to £1.2bn. Mortgage approvals are also expected to rise to £72.9k. If these credit numbers come in significantly above expectations it will raise concerns that the recent rise in retail sales has been driven by borrowing, given that average incomes remain well below the rate of inflation. If this is the case then there is the risk that the growth seen in recent months is simply not sustainable and in turn will reinforce concerns that the UK recovery is unbalanced, and that Q1 could well see a significant slowdown. EURUSD – another day passes, the fourth in a row, and another lower high and lower low and another failure to break the 1.3700 level, raising the prospect of an eventual push lower. Long term trend line resistance remains at 1.3865 from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. Support now looks pretty solid around the 1.3500 area and only a move below negates a potential retest of the highs. GBPUSD – while we failed to push below 1.6480 earlier this week we continue to struggle anywhere near the 1.6600 area. The second daily doji in a row speaks to market indecision at these levels. Whilst we remain below last Friday’s high the key day reversal day remains valid, and continues to suggest we may not see a move towards the 2011 highs at 1.6745. Only a break below 1.6480, would suggest a move towards 1.6300. EURGBP – Monday’s failure at the 0.8300 level has prompted a pullback but the bullish engulfing day remains valid whilst above the 0.8200 area. As such the potential for a move towards key resistance at 0.8330 remains, as well as trend line resistance from last August highs at 0.8395. The major support remains at the 0.8160/70 level which is the 61.8% retracement of the entire up move from 0.7755 to the 2013 highs at 0.8815, and a new one year low. USDJPY – the US dollar continues to find bids around the 101.80 level, however we need to see a move beyond 103.80 to suggest a move back towards 105.50. A close below 102.00 the 38.2% retracement of the up move from 96.55 to the peaks at 105.50 could well see a move towards the 101 area, the 50% level. 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.