Europe's markets closed mixed yesterday as investors mulled their next moves after strong gains in the early part of this week. Even US markets struggled to make any headway yesterday, as investors retreated cautiously to the side-lines. The main focus this week has been on last week's comments by ECB President Mario Draghi that the ECB was becoming concerned about declining inflation expectations. Investors seized on the comments as evidence that the ECB might be inclined to consider further stimulus as soon as next week's monthly rate meeting. This belief always seemed a little premature given the ECB's past behaviour and the fact that the recently announced TLTRO stimulus program is not even scheduled to start until September in any case. The only surprise was that it took German finance minister Schaeuble until the middle of this week to suggest that markets may have been "over interpreting" the ECB President and that austerity is not dead. These comments suggest that there remains a deep unease in Germany about further aggressive policy action, and to some extent reduce the prospect of further action next week, despite French calls for the ECB to do more to push the euro lower. The fact that the euro has declined nearly 5% since May seems to have passed them by. The waters were muddied further in the afternoon session yesterday by "ECB sources" who stated that any action next week remained highly unlikely, unless there was a significant drop-off in the inflation numbers this week. That last statement could well be key, but unless German CPI drops off a cliff when todays CPI data is published then it is likely that we won't see any action next week. Expectations are for German CPI to remain at 0.8% for August, while unemployment is expected to fall 5k, building on a 12k decline in July. The same can't be said for Spanish CPI which is expected to decline 0.5%, while the key headline rate for the EU is due out on Friday, and there is an expectation we could see this weaken slightly as well, but not by enough to suggest any action next week. In a rare spot of good news Spanish Q2 GDP is expected to be confirmed at 0.6% Whether today's data is good or bad scarcely matters in the context of what the market expects for next week, but with concerns about the effects of sanctions over the next few months, and political discord in France, the scope for disappointment next week is starting to rise. Later today the focus returns to the US economy and the second reading of US Q2 GDP, which is expected to be revised lower to 3.9% from 4%, with personal consumption expected to be revised lower to 2.4% from 2.5%. Weekly jobless claims are expected to come in around the 300k level but the housing market is expected to remain volatile, with pending home sales for July expected to rise 0.5%, after declining 1.1% in June. Earlier this week we saw new home sales drop 2.4% in July, missing expectations of a 5.7% rise and this is a concern for an economy, which like the UK, is very dependent on the property market for its feel-good factor. EURUSD - have we seen a short term base on the euro with yesterday's bullish reversal candle from yesterday's low at 1.3155? If we break back above 1.3230 and fill Friday's gap lower we could well see a run back to the 1.3330 area. The 1.3020 area remains the ultimate target being a 50% retracement of the move from the 2012 lows at 1.2042 to the 1.3993 highs earlier this year. GBPUSD - for the past five days the pound has been capped at 1.6610. A failure to break below this week's low at 1.6539 could well see a sharp short squeeze towards the 200 day MA at 1.6685. Could this week be the first week in eight that we see a positive week? A move below 1.6520 targets a move towards 1.6460 and the lows in March. EURGBP - the euro appears to be struggling to push back towards its recent lows falling briefly below 0.7950 but snapping back sharply. We could see a move back towards the 0.8000 level in the short term, but overall the trend remains lower, while below 0.8010 trend line resistance from the August highs. USDJPY - the US dollar is starting to look a little top heavy above the 104.10 area with the risk we could fall below the 103.70 area towards the 102.80/103.00 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. CMC Markets is an execution only provider. 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