 Rhaid oedd yn fawr, a rhaid o'r ffraidau o'n mhwng yma, rhaid o'n ffarn ei wneud o'r ffau cyfrifol yn pwg. Rwy'n ddweud o'r cyfrifol yw'r ddau cyd-dau dyfu o'r 130 mwy o'r ffordd yn gyffredinol, ond rhaid o'r hyn yn fwy ffawr o'r hynny'n dda'r ddau'r ddau eich ffwrdd a'r cyfrifol yw'r cyfrifol yw'r cyfrifol yw'r cyfrifol yw'r cyfrifol, UK politics as ever so quite a key what we call a bi-election in the constituency of Peterborough yesterday. It's quite an interesting background story I mean obviously you can see on the headlines here that Labour won it that was a bit of a surprise it was a Labour seat it was a bit of surprise for a couple of reasons number one the previous Labour MP for that constituency a bit a scandal she actually got given a prison sentence something related to a speeding fine and some dodgy dealings around that but essentially she got given a prison sentence and then Labour kicked her out of the party but she kind of continued to stand as the MP as an independent but then there's a big petition within the constituency and the number of signatures got above the limit and then right she got forced out and so it forces a bi-election and what's interesting about Peterborough they are a leave constituency they voted 61% of them voted to leave the EU of course Labour alright it's been flip-flopping massively on the Brexit issue but you know you would say that they're of course more on the softer side of Brexit than the Tories are so Farage sniffed an opportunity here and he put up a Brexit candidate for this constituency and they were odds on favourites to win because they're a leave constituency because of the the damage done by the previous Labour MP you would have thought the scandal would have damaged Labour's vote because Labour had been flip-flopping on the European issue as expected that actually Farage and his party Farage himself wasn't standing of course but it was expected that the Brexit party would take their first seat in parliament they failed okay so this is quite interesting so the they failed by just over 600 votes so Labour managed to cling on to the seat here Brexit party second Tories in third it was all quite tight even though the Tories got pushed into third they probably got more of the vote than people were actually expecting but it's an interesting one because on the one hand here you've got a leave constituency not voting for the I guess the two leave parties which would definitely be the Brexit party obviously but also the Conservatives they came in in second and third and Labour came in first so obviously Corbyn's loving it this morning also it tells you that the risk the Brexit party presents to the Tories because here's the Brexit party coming in and taking 9,800 votes in this election if the Brexit party weren't standing yesterday the Tories would have won comfortably except they were standing and this is the point the Brexit party presents a big risk for the Conservatives you know this is quite a good kind of measure if you like you know we had the European elections obviously but this was a kind of better measure of where the domestic thoughts lie and definitely well the Brexit party did well but not as well as expected now what does this mean for the kind of the leadership race if you like well let's have a look at the odds obviously Boris is still out in front this is quite an interesting graphic you know who's going to replace May she kind of officially ended her term yesterday she will be a caretaker MP until we get to the middle of July when we're hoping to have a new Conservative leader being found and here's a graphic looking at not the odds but this is looking at how many Conservative MP supporters do the candidates have who are running for to replace May and of course Boris is out in front here 42 and there is an argument to suggest that the Peterborough result is a negative for Boris because if you like what Boris kind of wanted was that the Brexit party won in Peterborough demonstrating the public are keen on a hard Brexit which perhaps would have played into Boris's hands the fact that the Brexit party lost perhaps shows that there's slightly less appetite for a full-on hard Brexit than some might have thought that might damage Boris's standing but at this point he's still comfortably in front in terms of the number of supporters he's got within his own party what's the breakdown of his supporters well any 60% chance of of winning this and when you've got about 12 people in the race that's a he is still strong favourite what's interesting about Boris here is 26 are Conservative supporters are leave campaigners but look he's got 16 actually remainers that's Conservative party members who are more on the remain side that are supporting him so indicating that his efforts to try and just bridge that gap and move a little bit back more centrist seem to be paying off his nearest rival at this point at least is Gove he's only 14% odds of actually winning he's got 19 remain supporters and nine leave you can have a look at this article in the FT if you want to go down and look at Jeremy Hunt he's got mostly on the on the remain side as you can see but what's interesting another graphic here is looking at not the Conservative party race but actually what's the national mood and this is the latest opinion polls obviously the brexit party they're only eight weeks old but they stormed the european elections and so when you're looking at national this is the you gov poll the brexit party atop and Labour and Lib Dems have had a big revival and actually here the Conservative party in fourth place so the brexit party after yesterday's Peterborough announcement is that the kind of beginning of the end of Farage I think he was hoping to to claim the party's first seat in parliament and they've just about failed even though they were up against a Labour party whose candidate had just been given a prison sentence so it's an interesting one now from a a markets perspective let's just have a look at the pound through this and it's been very quiet so this kind of by election situation has hasn't really presented much by way of volatility in fact the pound is trading kind of bang in the middle of the range that we've seen over the last couple of days obviously we've had some some dollar weakness through the first part of the week which has led to cable rising here but we just flattened off Wednesday Thursday and this by election result and Theresa May coming into the end of her official term and and then the maneuverings behind the scenes in the leadership race hasn't yet really had much of an impact but let's look on the daily chart because you've still got you know analysts expecting you know if we do get I mean the reason why the pound's been lower over the the course of May is that you know obviously May announcing her resignation and the idea that we are perhaps going to have a harder Brexit MP in the shape of Boris and what does that mean for the UK economy and ultimately the big level of course which you'll all be aware of on the downside other than the May low at 125 68 is that low from back in December just down around that 125 handle but if we got a Boris MP if we got a hard Brexit 31st of October then you definitely got analysts looking at a key break of the 2018 low and a test of and a test of the big 120 handle always remember that 120 handle from back in 2016 and then start 2017 I mean that's the the ultimate level on the downside but obviously plenty of weeks to go ahead of us with regards to this Tory party race so keep your eye on that but for now with this Peterborough event negotiated the pound is quite happy to tread water here having had a dollar weakness bounce and I would suggest that today is going to be mostly about waiting for those payrolls numbers this afternoon and perhaps it'll be the dollar that kind of shapes the direction of this pair so that's an update on the UK let's have a quick look back at yesterday before we look at some more up to date European information flow because we've had some bad data from Germany this morning and I'll talk about that in a minute but one of the key events from yesterday's session was the the Draghi the Draghi show so it was the ECB's monetary policy meeting remember they have one of these every six weeks and this is where they convene obviously assess economic conditions and then decide where they're going to make changes to policy and are they going to make changes to interest rates well obviously not at this point interest rates are at zero what was key about yesterday was you know what what's the current assessment and and the reason why we're worried about the current assessment and let me just bring up sorry I should have had this up I'm going to bring up a European inflation chart all eyes were on this chart really and the problem was that earlier this week Europe announced their inflation rate for the month of May and it was a surprise drop to 1.2% okay and as you can see on this chart that's the worst reading for 12 months at least go to a five-year chart go to go back yeah basically 15 16 months to find the last time that inflation was this low okay do do be aware that the inflation rate of 1.1% which was the 2018 low is very critical if we did on this downward tick we're seeing now let's just say inflation drops below 1.1% that would be then more like a a two-year low and then the ECB would have a an interesting problem on their hands so what we were looking for yesterday was news from Draghi we wanted to know how worried are the ECB about this drop to 1.2% clearly the european economy as I'll show you with the german industrial production data shortly the european economy is flagging momentum is waning it's a real concern the ECB only ended their stimulus program at the end of last year and as soon as they've ended it really we've had this downturn it's not all europe's fault we've had a lot of risk globally we've had a perhaps a dampening of momentum on a global level we've had obviously us china trade war risks and all the rest of it but certainly internally europe is flagging and inflation is back on the downside the ECB have only just ended their qe program and it looks like at the moment it's like a matter of when not if they're going to have to restart it and we were wanting guidance yesterday now um Draghi came in uh and in his press conference well let me look at that graphic in a second I want to show you the the chart for let's let's use the euro dollar um that's the wrong chart let me enlarge the euro dollar chart because it was a choppy old session when we had a big a sort of hawkish reaction to start well no let me let me let me go even quicker we had a we had a dovish reaction to begin with as the euro quickly sharply broke new loads for the for the session i'll go to a five minute chart actually and we'll zoom in on on this activity um you can see break lower very briefly then a pop an up new highs and then we drove higher and higher we identified the key level up at 113 18 that was the high from the day before uh and that proved to be the cap on the upside and then things settled and actually the euro dollar pulled all the way back down almost to where we started almost a full retracement then a drift back higher into the close last night what's happened overnight a drift back lower and all in all here we are sat back below the 128 handle pretty much where we were chopping around for the whole of wednesday's session and for the first part of thursday's session so it's like sorry for the whole of tuesday's session and the first part of wednesday's session so after all of that from draghi in all of the volatility that it created um because we had uh well we had a 120 pip range really off draghi yesterday with plenty of movement in both directions but in the end it's all kind of back to the middle so why and let's have a look at this graphic because i guess the problem is we're worried about europe okay we're worried about the european economy we're worried about that downtick in inflation that we saw uh for the may reading so it's what are they going to do about it and draghi really came out yesterday and actually was a little bit more forthright with regards to the tool that the the tools the ecb have at their disposal because one of the big risks we're worried about is well do they have any tools left rates are at zero they've just ended a massive qe program is there any more qe appetite in that central bank so we're worried on that front but draghi came out yesterday and definitely said we have tools on the table you know very much in fed language he said look we're in data dependent mode we're waiting and we're seeing um that downtick in inflation for the month of may um really we're going to have to see another month with inflation down there for the ecb to take that more seriously it might just be a blip lower um but really draghi was saying look we've got absolutely ammunition to restart our qe program secondly he said actually we've got interest rates as a tool now that was a bit more surprising because interest rates are at zero and so we were thinking there's not much ammunition there but apparently according to draghi there might be but the point I want to make here is look at this chart the problem is look at the black bar this is like a timeline chart the black bar is draghi's term um so the problem is draghi stepping down in november um his eight years will be up and he's going to have a successor and at the moment we're most likely going to be seeing a more hawkish successor probably from germany we'll have to wait and see but the point is that the ecb president is most likely going to be more hawkish than draghi it is now therefore has draghi got enough time left to implement another another dovish stimulus kind of strategy to guard against that drop in inflation and this is what I guess markets were trying to wrangle with yesterday draghi was trying to be dovish so the euro initially dropped but then they're thinking well okay draghi's not being out and out he's not starting qe here so the euro kind of bounce and then it's like well okay he's saying that the ecb do have appetite to act but if we get a hawkish shift when draghi leaves the question is whether the new ecb president is going to be willing to carry on draghi's strategy so all of that was kind of in the mix yesterday and ultimately in the end if we go back to the chart the euro dollar ends up right now trading pretty much bang in the middle of that volatility from yesterday let me just say so draghi was you know trying to be a bit more clear on the pathway ahead for the ecb and the reason why I was so concerned is not only that inflation data but this is bang hot off the press because this is data from the from Germany this morning industrial production data for the month of april here so it's a little bit old this industrial production data tends to get delivered quite late obviously we're in june now and this is april data but check out the reading it's minus 1.9 percent now put a bit of a caveat on that industrial production data can be quite volatile as you can see from this chart it's quite choppy but 1.9 percent that's more than just choppiness if we go back on a five-year measure that's right at the bottom end of this range that we've seen in the last five years 2014 was the last time we went below minus two okay so it may well be that this is fine if the months to come maze reading june's reading if those tick back up to positive well okay fine this range we've seen play out for the last few years continues but next month's readings keep if the may industrial production data for germany that's not going to be announced for another few weeks when it does get announced if it's below minus two well then this kind of range is done that would be an indication that the european economy's momentum is weakening even further that would give further evidence that that down ticking inflation will be ongoing and it may well be the thing that forces the ecb hands to take action before dragu leaves um so that's kind of all in the mix on the ecb um okay let's shift our attention and what i actually wanted to do um so hang on let me shift my headline here we'll talk about payrolls in a second but before we move away from the charts let's just give a general update um of the week well final final day of the week obviously and it's been actually a really solid week for stocks if you take the s&p here um plenty of green over on the right hand side we have five updates in a row as we speak um obviously things can change this afternoon uh sorry i'm not showing you my chart here we go apologies so this is the daily chart for the s&p and i'm just looking on the far right hand side um five updates in a row nice solid rebound from obviously what was our big kind of move to the downside a big break of that 2800 handle you know all's kind of well us trade related with the us china thing still um in a negative place added on top of that trump's uh decision to start um focusing his attention's on on mexico um but things have just calmed and we're moving a bit closer towards some kind of idea that a deal's going to get done with mexico and so stocks have been able to rebound and this is a really solid rebound um technically speaking let me just go to a shorter time period because you've got people looking at the move from yesterday if you draw a trend line then this this kind of sell-off we'd seen that had a quite a nice uniformity to it from a trend perspective and yet that break to the upside that we got earlier in the week and now into yesterday's session is a nice clean trend line break indicating that um you know the the nervousness around the us trade situation has calmed um we'll look at the labour market situation in a second this is also despite the fact that on wednesday we got really bad adp employment figures but your own powers got a lot to do with this um your own powers steered the federal reserve communication to a slightly more dovish angle earlier in the week and that's really what's got things moving on the upside really big shift in expectations about um the feds willingness to act and cut rates and we've even now got you know the general consensus being we're looking at three interest rate cuts from the fed i mean the probability of three rate cuts um is now up i believe it's up at about 65 percent there's a 65 probability the fed will cut rates three times over the next nine to twelve months let's say the point about that is if you go back just four weeks the probability of the fed cutting rates three times four weeks ago was at three percent so we've moved from a three percent probability of three rate cuts to a 65 percent probability of three rate cuts who likes rate cuts stocks so the s and p 500 prices rifling north despite the trade war risks um so another kind of by the dip scenario here and then the big question is how how far can this upward rebound go and history tells us it can go all the way um but we do have growing risks um clearly with mexico and china but then also this whole european momentum slow down um obviously brexit's still on the table as a problem uh so we shall see but there's nothing like a good kind of bit of fed dovishness to stoke the fires of the equity bulls and right now as i speak we're testing the highs for the week uh that that was the high that was set yesterday uh 28 53 and indeed we're actually moving slightly above it so i knew high for the week here and and in terms of levels further on the upside if you're looking at the s and p then you know key top would be up around the 28 94 level just shy of 2900 we're quite a way off that we're not going to get there today no way but maybe next week if this positive sentiment can continue some of it some of it might depend on what happens this afternoon so let's have a kind of final focus on um this afternoon we've got non-farm payrolls coming out of the us so of course this is the um the the key monthly labor market report and the reason why people are well i guess what's made this a little more interesting is what happened on Wednesday so one of the key metrics that will be announced is something called non-farm payrolls as most of you will know non-farm payrolls that will be announced at 130 that's the measure of how many jobs were created in the month of may what we had on Wednesday was what's called the ADP employment change and this is looking at the private sector only and it was a disaster um we saw this collapse it was way worse than expected down at just 27 000 now you go back on a 10-year time frame that's the worst reading since 2010 we've gotten all of a sudden a nine year low on private sector job creation according to the ADP all right now what does this mean for this afternoon's payrolls well let's check out the chart looking at non-farm payrolls um and the thing about April was we had a very strong reading so in April we had 263 000 um for non-farm payrolls what are we expecting today 185 000 is today's expectations despite the fact the ADP number was so low you've still seen expectations remain fairly solid here's a look at what the big banks are expecting this is after the ADP reading we got on wednesday you've still got most of the big banks being relatively bullish um UBS at the top of the list at 208 000 gold ones up at 195 um you got Natwest and an RBC bang on the market consensus which is 185 000 you got some bears in the mix some of the bigger guns like Citigroup and Credit Suisse down here Deutsche Bank at 160 as well JP Morgan um sock gen even more bearish so um this is what the the big boys think um I don't know it's let's go back to that chart well yeah I guess the other thing to say is it's not just about job creation it's also about wage growth and it's thinking about the Fed and it's thinking about inflation on the wage growth front we're expecting um well we're expecting the annualised reading to be at 3.2 percent last month the wage growth number slightly disappointed which offset marginally that really bullish headline number so keep your eye out for the wage growth data of course this afternoon but if we flick back to my charts um you know obviously the obviously the S&P here is on a tear can it move higher well well it can I mean what will prevent it moving higher we're going to be careful about today or I'd say is really bullish data if you get really strong non-farm payrolls you know surprisingly strong given the ADP reading if you get maybe more importantly if you get the wage growth data coming in really strong well that is going to then offset some of the Fed dovishness that we had earlier in the week the Fed can't be dovish if wage growth is ramping higher because they're going to start to get worried that inflation is going to start to rise and they can't cut rates in the face of rising inflation no matter what Donald Trump wants so be careful today with stocks if you get really strong data especially on the wage growth front don't be surprised if stocks sell off um because they'll be concerned that the Fed can't deliver three rate cuts okay so be careful of that slightly counterintuitive strong jobs data you might see equities move to the downside none of that kind of confusion with the dollar and I would suggest you know if you're looking at cable perhaps here you've got a bit more room to move to the downside than you have on on euro dollar so strong data be looking for short cable looking for dollar strength looking for a break of that um the low that we had from yesterday at 126.74 and looking for a move down towards that 126 handle okay giving back the weakness that we'd seen earlier in the week so certainly looking for some dollar strength of some bullish data obviously it might be the opposite obviously it might be weak uh data it may well be the ADP is correct and we're going to see um a drop on the headline payrolls if it if that if you get a drop in payrolls if it's below 100 000 plus if you get weak wage growth data well fine you know this three rate cut idea well the probability is going to rise even further and you are going to see dollar weakness continue you're going to see a a break of the double top that we had that we have in place so far for cable uh for the week and you're going to see cable and euro dollar move to the upside um in the face of that Fed rate cut expectation continuing to rise goals an interesting one let's have a little look at that goals had a just a phenomenal period over the course of well this this week and end of last week just so explosive to the upside um you know some key technical breaches and so let me just move that in the end we just kind of caught some resistance at what at the high of the year basically we've got a double top for the year right now but just an amazing run here trade war risk fed dovishness all in the mix here powering things higher so uh less room on the upside here for gold off dovish data so if you get bad news from the labour market report today don't expect too much more on the upside from gold it's already gone an incredible distance the big trade for gold is going to be on the downside and that will be off really strong us data then you're going to see that rate cut probabilities subside and so way more i'd only be trading gold this afternoon if it's a short of strong kind of hawkish data okay so that'll be at 130 i'm just going to finish with the price of oil because i've covered most markets here but we haven't looked at oil yet oil's had a nice rebound and it's recovered the big downside that we got on wediwyr seision if i just add a couple of key lines in here the low point that we had back at the end of last week uh sorry i should say the start of this week broke it on wediwyr off the bearish inventory data from the us that to a degree presented some resistance but um yesterday uh we broke it to the upside last night um you know the kind of bullish sentiment as stocks continue to rise certainly helping oil lift off those those low points and do remember that on the daily chart i guess like gold oils had a phenomenal few weeks but in the opposite direction of course and you know clearly the trade this afternoon would be oil to the upside of bullish data i would guess but the problem with that is bullish data will bring dollar strength which might hamper the upside a little bit but um oil's so low here relatively speaking um that any kind of sense that we've over exaggerated our concerns about the global economic slow down any kind of sense that's the case then oil's got a decent amount of room to rebound on the upside um okay so that's it then for my briefing uh final uh sort of session of the week uh keep things tight this morning tends to be relatively quiet prior to the the big data that we were we're expecting at 130 okay so otherwise um that's it from the desk and enjoy your weekends thanks very much