Anyone looking at yesterday’s continued stock market rebounds in the US and Europe for this week could have been forgiven for thinking that we’d had a day and a week of fairly positive economic data. In fact the complete opposite has been true culminating yesterday with European GDP coming to a shuddering halt against the buffers in Q2, with Germany seeing the biggest drop off as the economy shrank 0.2%, falling from the 0.7% growth seen in Q1. There were some bright spots this week, namely the Netherlands, Spain and Portugal, but there was no escaping the fact that Europe’s three largest economies of Germany, France and Italy didn’t grow at all in Q2. Furthermore with prices falling sharply across the euro area the siren calls for the European Central Bank to do more are starting to become deafening. With these calls for full blown QE getting louder and louder it would appear that markets are betting that Germany and the Bundesbank will ultimately bend to the will of the crowd, hence yesterday’s drift higher. For the moment this seems unlikely, but it is becoming increasingly obvious that the Bundesbank and Germany are starting to get slowly pushed into a corner, while politicians in Italy and France in particular seem content to pass responsibility for their own inaction onto the ECB. The fact is while QE might be part of a solution, it is not the whole solution and the reluctance of the Germans to countenance it is simply because French and Italian politicians will carry on exactly as before, doing nothing to reform their sclerotic economies. EU authorities would also stand accused of hypocrisy having insisted on painful reforms in Spain, Greece, Portugal and Ireland, but then changing the rules for France and Italy. Also helping sentiment yesterday were some positive comments from Russian President Putin about ending the crisis in Ukraine, however investors would do well to react to what Putin does and not what he says, as the two don’t always converge, while the fate of the elusive Russian aid convoy remains unresolved. As for today, after the horror show of European data this week, we have the latest Q2 GDP number from the UK which is expected to come in unchanged at 0.8% on the quarter, and 3.1% annualised, contrasting sharply with this week’s weak European numbers. Unfortunately despite the continued growth of the UK economy we can ill afford to be complacent as the slowdown in Europe will act as a drag on our economy over the next two quarters, meaning that our exports to the rest of the world will have to take up the slack, given that, according to MPC member David Miles, our largest trading partner is “dead in the water.” With US data also coming rather patchy this week the general consensus appears to for central bank policy to remain looser for longer and today’s latest industrial and manufacturing production for July are expected to show an improvement at the start of Q3 of 0.3% and 0.5% respectively. Empire manufacturing for August is also expected to come in at 20, down from 25.6 in July. EURUSD – the euro continues to find support above the lows at 1.3333, but also continues to struggle above 1.3400. Until we are able to take out the previous lows at 1.3333, the risk of a short squeeze remains. The main resistance remains at 1.3475, which we need to overcome to target a stronger rebound. Below 1.3300 targets 1.3225. GBPUSD – the pound has found support for now at the 200 day MA at 1.6655, but does appear vulnerable to a break lower. A daily close below here could well signal further losses towards1.6520. To stabilise the pound needs to push back above 1.6760 and last week’s low. EURGBP – we’ve pushed through the 0.8000 level and now need to hold above it to push higher towards the 0.8085 area. A fall below 0.8000 could see a dip to 0.7970 initially, with support also at 0.7920. USDJPY – indecision remains the primary driver here as the US dollar continues to remain range bound with resistance at last week’s highs at 103.00/10 and support in the mid 101’s. There is nothing to suggest though that we won't continue to trade within the broad range that we've been in over the last six months. We have resistance at 103.00, and support at 101.20. 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.