As the Federal Reserve continues to taper their asset purchase program investors have inevitably been looking for clues as to when interest rates would rise once the program has ceased. We’ve already had a taste earlier this year of the market reaction to the timing of such an event by a throwaway comment from Fed chief Janet Yellen when asked about when we could expect to see a shift in policy, once tapering had ended. While she quickly backtracked on the remark over the next few days, the subsequent market reaction illustrated perfectly how sensitive markets are to the potential for any sort of tightening of monetary conditions. With that in mind and the Fed on auto pilot as regards tapering, investors now have to settle for poring over the finer details of either, post meeting Fed statements, or the Fed minutes, for any clues as to what FOMC policymakers are currently thinking with respect to the direction of travel and timing of a future rate rise, given that the so called dot charts appear to be largely irrelevant. Last night’s FOMC minutes didn’t really add anything new to what we already knew about the US economy, and the belief that the FOMC members believe that the US economy will bounce back from its poor performance in Q1. Officials did discuss looking at additional steps to reinforce its forward guidance with respect to the size of its balance sheet, as well as discussing how to begin to go about normalising interest rates, but there was nothing in the minutes to suggest any change of tone in the near future, which helped US markets finish on their highs for the day. Back in Europe the focus returns to the strength, or otherwise of the economy in Europe after last week’s really disappointing Q1 GDP numbers. Last week’s poor GDP numbers were all the more surprising given that recent PMI data since the beginning of the year had been largely fairly positive, so to see the negative numbers was a bit of a surprise. Today’s flash manufacturing and services PMI data for May from France and Germany could well likely reinforce these growth concerns for Q2 GDP given that expectations are for the PMI’s for both to come in weaker than the April numbers. That will be more of a concern for the French economy given it is already showing signs of stagnation with manufacturing expected to come in at 51 and services at 50.2. Even the German economy, which outperformed in Q1, is starting to show signs of slowing down with manufacturing expected to come in at 54, and services at 54.5. While concerns are rising about the economy in Europe, the UK economy is having the opposite problem with some concerns it is running at too high a pace. Yesterday’s bumper retail sales numbers for April, along with the Bank of England minutes have once again moved the debate over the timing of the first move higher in interest rates forward to this side of the election, as opposed to Q2 next year, particularly given yesterday’s comment that any rate decision is becoming “more balanced” for some on the MPC. Given that these minutes are from the beginning of this month, and that the data seen since then has continued to improve then you would expect that “balance” to have shifted further. Today’s latest revision to the UK Q1 GDP numbers is not expected to deliver any surprises with growth expected to remain at 0.8%, but we should pay particular attention to the business investment number which could get revised. Public sector net borrowing for March is expected to come in at £3.6bn, a significant improvement from February’s £4.9bn. EURUSD – though we dipped below 1.3650 we held above the 200 day MA at 1.3630 and rebounded strongly. We need a break below 1.3650 to signal the completion of a double top reversal pattern and a break of the 200 day MA at 1.3630 to target the February lows at 1.3480. We need a move back above the 50 day MA and through 1.3780 to stabilise and retarget 1.3850. GBPUSD – yesterday’s rally stalled at 1.6920 and as such keeps the prospect of a move towards 1.7000 very much on the cards. The main support remains at last week's lows and the 50 day MA at 1.6735, however we also have interim support at 1.6820. EURGBP – the euro has managed to push below 0.8100 and hit its lowest levels since December 2012. A break below 0.8085 opens up the potential for a move towards 0.8035. Resistance now sits at 0.8130 with only a move back through the 0.8200 area hinting at a return towards 0.8250. USDJPY – yesterday’s break below the 200 day MA wasn’t able to push beyond the lows this year at 100.65, and the subsequent snapback keeps the upside potential intact for now, but the rallies continue to remain weak. We need to see a close below 101.20 to target a move towards 100.00. We need to see a recovery back through the highs this month at the 102.80 level to suggest a move back to the highs at the beginning of April at 104.10. 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. 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