In the absence of any meaningful economic data out of the US this week until Friday, stock markets continue to be driven by the easing of geopolitical concerns surrounding Syria, after President Obama postponed a congressional vote on Syria last night. As optimism increases about the turnaround in recent Chinese data we saw US markets once again close higher as they look to close back in on their August highs. Asia’s markets have taken their cues from the positive finish in the US and Europe’s markets look set to build on their gains this week with another positive open this morning. The main focus of attention today is likely to be on the latest UK unemployment numbers which while not exactly having the cachet of the US employment report will now be closely scrutinised much more than usual than has been the case in recent months. The recent decision by the Bank of England to use a 7% unemployment threshold as a “staging post” before the MPC considers discussing any move on interest rates has placed much more scrutiny on these numbers, as well as the monthly jobless claims numbers. As one of the Bank’s key knock-outs, it along with the inflation numbers is one of Mark Carney’s exit doors for a reappraisal of the low rates forward guidance. Looking at the consensus number for today’s 3 month figure it seems rather odd that expectations are stuck at 7.8%, unchanged from last month’s 7.8% figure. This seems rather odd given that we saw the monthly June number fall to 7.4%, and for the 3 month average to stay at the current level then the July number would need to jump sharply, above 7.8%. Given that we saw jobless claims for July slide by 29k this doesn’t seem that likely. Factoring all of that in it would not be too much of a surprise to see the ILO number come in as low as 7.6%, and at the very least 7.7%, which would put further upward pressure on 10 year gilt yields which yesterday closed at their highest levels since July 2011, above 3%. Also due out August jobless claims are expected to show a decline in excess of 20k, which would be the third month in a row that we would have seen a decline of this magnitude. In not so good news the squeeze on incomes looks set to continue with average earnings for July expected to show a rise of 1.3%, down from a 2.1% increase in June. With inflation still running in excess of 2.5%, this does not bode well for consumer spending and the consumer led part of the recent recovery into the latter part of this year. Over in Europe the political soap opera surrounding Silvio Berlusconi continues to rumble on as the Italian Senate commission unsurprisingly delayed a decision on expelling the former PM from parliament as his political allies continue to ratchet up the pressure by threatening to bring down the government. Italian bond yields in response have edged above 4.5% on these political concerns and above Spanish borrowing costs for the first time in 18 months. Yesterday’s worse than expected Q2 GDP revision to -0.3% serves only to highlight the urgency in resolving this uncertainty, despite some recent evidence of a recovery in Q3. On the flip side some have suggested that the Spanish economy could be starting to show some green shoots of recovery, given the recent recovery in PMI’s, and the switch over in borrowing costs. This has prompted the Spanish treasury to consider the idea of a 50 year bond given the current calm in European bond markets. This optimism does seem somewhat premature for the following reasons, notwithstanding the competency or otherwise of the Spanish government. For instance concerns remain surrounding the political denial surrounding the health of the Spanish banking sector, as bad loans continue to increase. Small businesses still find it difficult to raise finance and will continue to do so until there is some evidence of a pickup in demand within the Spanish economy, and not just its export markets. We can talk about green shoots but Spanish borrowing costs have barely moved in the past few weeks, we’ve simply seen Italy’s borrowing costs come up and meet them. It would be more encouraging if the recent falls in unemployment we’ve seen recently, survive the seasonal drops the end of the tourist season normally brings. EURUSD – the continued resilience of the euro remains a worry for euro bears with the prospect of a move back towards the recent range highs at 1.3400 a real possibility having managed to break back above the 1.3180 pivot, negating the prospect of a move back to 1.3000 in the short term. For now the next resistance sits at 1.3280, 50% retracement of the 1.3450/1.3105 down move, and then 1.3320. On the downside we can find support back at the 1.3180 pivot. GBPUSD – the pound continues to push higher as we look to test the trifecta of resistance levels around the 1.5740/50 level. This is where we have the 100 week and 200 week M/A’s as well as the June highs, which continue to be tough nuts to crack. The lack of any dips would appear to suggest we could be building up for a move higher towards 1.6000. Even so, until we get above 1.5770, the potential for pullbacks towards trend line support at 1.5570 from the 1.4815 low remains on the table. While above here and the low 2 weeks ago at 1.5440 the trend remains positive. Only below the 1.5400 level argues for a sharper move towards 1.5340, and then 1.5260. EURGBP – while the 0.8390 area holds the prospects of further short squeezes remains probable but as long we stay below the 0.8480/90 area and 200 day MA the outlook remains bearish. A break below the 0.8390 area argues for a move back towards 0.8320. USDJPY – having taken out Friday’s high thus negating the bearish candle the prospect of further gains towards the May highs at 103.75 remains possible, with a move through 100.50 suggesting the potential for further gains. The long term triangle target remains at 108.00. The only concern is the stalling of momentum which could see an increasing risk for a move back below 98.80 undermining this scenario and arguing for a test back towards the 97.00 level. CMC Markets is an execution only provider. 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