Earlier this week the latest Chinese economic data didn’t really do anything much to assuage concerns that the world’s second largest economy was starting to lose traction as Q3 GDP slipped back to 7.3%, below the Chinese government’s 7.5% GDP target. This morning we saw further evidence that manufacturing activity continues to remains muted with the latest HSBC manufacturing PMI number for October improving slightly to 50.4. The recent rebounds in European stock markets have been largely predicated on expectations of further stimulus from the European Central Bank as we head into year end. These expectations are expected to be reinforced later this morning, regardless of their credibility, and denials from the ECB, when we get the latest manufacturing and services PMI readings for September from France and Germany, with further deteriorations in economic activity expected. Both manufacturing and services PMI numbers for France are expected to show further weakness, declining to 48.6 and 48.2 respectively from previous 48.8 and 48.4. The economic malaise is also expected to be reflected in the German numbers with the manufacturing sector showing further weakness from 49.9 to 49.6, while services are expected to remain fairly robust albeit declining from 55.7 to 55. On a slightly positive note quarterly Spanish unemployment is set to show a fall from 24.5% to 24.1%, a small victory albeit a fairly hollow one, and the lowest number since Jan 2012. Yesterday’s Bank of England minutes would appear to confirm that like the Federal Reserve, that policymakers at the Bank of England, bar two exceptions, have seen concerns about the economy in Europe translate into a cooling of expectations of an interest rate rise in the UK until well into next year. It wouldn’t be surprising given the recent fall in CPI inflation and the continued weakness of economic data in Europe if we saw at least one of the two dissenters on the MPC fall back into line at next month’s November meeting, especially if economic data here in the UK continues to soften in the next couple of weeks. We could well see further evidence of that later this morning with the latest September retail sales data, which could show a 0.1% decline from the 0.4% rise seen in August. In the comparable BRC figures for September we saw a 2.8% decline due to the unseasonably warm weather which if replicated in today’s ONS numbers will likely increase concerns about a slowdown in consumer spending in the lead-up to winter. Typically these sorts of seasonal effects have a habit of playing catch-up and the recent wet and windy weather seen in October could well prompt a bounce back, but nonetheless a slowdown here will reinforce a weaker narrative in Q4 growth expectations. EURUSD – the break below channel support at 1.2700 undermines the bullish case for the euro and suggests a retest of the 1.2570 level as well as the recent lows at 1.2500. We need to get back above the 1.2720 area to suggest a recovery back towards 1.2800. GBPUSD – having failed at 1.6184 earlier this week we are still trading in between the broader wedge formation with the previous lows at 1.5875 a key support area, and resistance now at 1.6160. The 1.6160 area needs to break to help mitigate the recent downside momentum, and suggest a move towards 1.6300. EURGBP – we continue to weaken and have fallen back below the 0.7920 area suggesting a return towards the low last week at 0.7855, on a break below 0.7900. Pullbacks could well find selling interest at 0.7940. USDJPY – continues to find resistance just below the resistance at 107.60 which means the risk remains for a drift back lower towards last week’s low at 105.20. We really need to see a move beyond 107.60 to suggest a deeper move back towards 108.50. In the longer term it would appear the damage has been done, and we could well head all the way back to the 100.00 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.