US equity markets pulled off yet another nasty bear trap yesterday evening, rallying hard into the close, after a rather surprisingly dovish set of Federal Reserve minutes sent the US dollar plunging and brought US stock markets off multi week lows. Markets had almost whipped themselves up into a frenzy of expectation that these minutes might well have had a rather hawkish tone, not altogether surprising given the additional dissent from the Dallas Fed’s Richard Fisher. Contrary to this expectation the minutes showed that officials were more concerned that the recent strength of the US dollar could weigh down US inflation expectations, and in turn affect US growth prospects, while at the same time the slowdown in Europe could well limit the growth potential in the US over the next year or so, as they revised down their GDP expectations for 2015. The minutes also showed a Fed that is conflicted as to how to extract itself from its current guidance without sending the wrong message to the market as to the timing of any potential tightening of policy. This unexpectedly dovish tone would appear to suggest that once again markets got their knickers in a twist over nothing, and that a Fed rate hike still remains some way off, though speculation about the timing will still continue with every subsequent bit of positive data over the coming weeks. One thing is sure with the Fed worried about a strong dollar and the ECB wanting a weak euro, we now look to be in a situation where neither central bank wants a strong currency and that could spell trouble for the ECB in its attempts to weaken the euro further, simply because further euro losses could well be much harder to attain, if the Fed decides that further US dollar gains could be problematic. That being said it should be remembered that these minutes were the product of a 142k August payrolls environment. Since that meeting we’ve had a strong September jobs number as well as a strong upward revisions to July and August, so these minutes are rather stale. It would therefore be prudent to listen to the number of Fed members due to give speeches this week to see as to whether the tone of the debate has shifted that much since those two days in September. As a result today’s open in Europe is likely to be a positive one, as investors look ahead to today’s Bank of England meeting with every expectation that this meeting will be as equally non-eventful as the previous 66 meetings, with no change in rates expected. While we may well have two dissenters on the MPC it remains unlikely that we will see any more while inflation remains well below target and while average earnings still lag well behind the headline inflation rate. Furthermore recent economic data would appear to suggest that the recent pace of growth that we saw in the first half of this year does appear to be levelling off, particularly in the manufacturing sector if recent PMI data is anything to go by, while the recent steep drop in oil prices, could well add an unexpected boost of its own, as consumers find more money in their pockets as a result of lower fuel prices. The net result of that will be lower inflation which could well negate any potential worries about an imminent rise in interest rates. EURUSD – the 1.2570 level continues to support and yesterday’s break above the 1.2700 level should precipitate a move towards 1.2785 in the short term as Monday’s mildly bullish candle on continues to support, with the broader risk of a move towards 1.2900. Below 1.2570 argues for a retest of the 1.2500 level and then 1.2400. GBPUSD – the pound continues to pull away from 1.6000 and looks to be headed back towards the 1.6220 level. The tweezer bottom at 1.5950 could well have been an early indication of a sharp rebound. Any move below the 1.6020 area and the risk remains for a move back towards 1.5950 on the way to 1.5720. EURGBP – we finally pushed through the 0.7875 level running into some selling around the 0.7900 level and ultimately we would expect to see a move towards the 0.7930 level. The support remains on the downside at 2012 lows at 0.7754 and last week's lows at 0.7765. USDJPY – while 110.00 caps the key reversal day on Wednesday remains valid and as such we could well see further weakness on a break below 108.00, and argue for a test of the 106.20 area in the coming days. 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.