In an unfortunate accident of timing it is somewhat ironic that the day after the World Bank upgraded its growth forecasts for the US economy, and cited it as the “single engine” keeping the global economy ticking along, that we should see some economic data that seemed to suggest that this engine might well be starting to develop a bit of a misfire. The stock market sell-off seen across the board yesterday appears to have been brought about concerns about the prospects for growth in China and in Europe weighing on sentiment, reinforced by sharp declines in the copper price as it dropped sharply to its lowest levels since 2009. While these falls in commodity prices are welcome from an inflationary point of view the sharp declines are raising concerns that the demand driven days of a few years ago are a thing of the past, and that with all the capital expenditure that has gone into higher production and new resources in the past few years, the commodity space now has excess capacity at a time when demand is declining. The big question now being weighed up by investors is whether the fiscal boost of lower inflation to one part of the economy will be enough to offset the reduction in capital expenditure and potential margin squeezes to the other parts of the economy that rely on the energy sector. Last nights Fed Beige Book articulated some concerns on this latter point due to the sharp falls in the oil price affecting economic output in the energy sector. The jury remains out on the effect on the US consumer after a simply shocking December retail sales report, which saw a decline of 0.9%, for the month, and a number which wiped out the gains for the whole of the fourth quarter. This retail performance in Q4 came despite gasoline prices that have declined by a third from over $3 a gallon in September, to levels just above $2 now. If US consumers are feeling flush they certainly aren’t showing it, and as such further data deterioration could well prompt a delay in the tightening of policy by the Federal Reserve in the coming months, with the possibility that the rate hike currently being expected by the market sometime this year, may not happen at all until 2016.Even a fairly positive ruling from the European Court of Justice on the legality of the OMT program failed to ignite much of a positive reaction from markets, despite the expectation that it makes it much more likely that we will probably get some form of policy announcement next week about a new ECB stimulus program. While the ruling is not binding, if ratified by the ECJ later this year it does potentially put the European Court on a collision course with the German Constitutional Court, given it overrules German sovereignty on what has been a key economic red line. It seems unlikely that we’ve heard the last of this, but for now yesterday’s ruling does appear to provide political cover for Mr Draghi next week to outline a framework for some form of limited stimulus package. As for today’s European trading session a late rebound in oil prices yesterday pulled US markets off their lowest levels of the day as the February contract came up for expiry and looks set to see markets open higher this morning, with the volatility of recent days set to continue. EURUSD – we saw a brief dip below the previous lows at 1.1750 to 1.1728 yesterday but soon rebounded back above 1.1800. While the bullish candle last Friday has now been negated the prospect of a short squeeze remains in the table, with a move back through 1.1880. The main resistance sits at the 200 month MA at 1.2240. A move below 1.1750 targets 1.1600. GBPUSD – the lack of dip yesterday appears to suggest we might be building up a base here and the potential for a move towards 1.5320. The daily candle formation of the last two days continues to reinforce the potential for a short squeeze. Intraday support comes in at 1.5100 as well as last week's low at 1.5035. EURGBP – continues to look weak after making new lows yesterday at 0.7732 we look set for a move towards 0.7690. Be prepared for a short squeeze towards 0.7800 on any pullbacks but the momentum remains negative. USDJPY – having seen a drop towards 116.05 yesterday we could squeeze back towards 118.00, but the momentum does appear to have shifted with the next support remaining at the 115.60 level. We would need to see a recovery in US 10y yields above 2% to suggest a turnaround and return towards the peaks. CMC Markets is an execution only service 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.