 Good morning. Welcome to CMC Markets on Friday the 6th of September and this quick look ahead to the week beginning of the 9th of September It's certainly been a fairly interesting week of developments in not only the US-China trade story But also with respect to Brexit as well as further central bank easing We'll start with further central bank easing given the fact that in the coming week We've got an ECB rate meeting people's bank of China as we can see from this breaking news alert In the top right hand column is the people's bank of china There's cut its triple r rate by 50 basis points from september the 15 with subsequent 50 basis point cuts In october and november But that's sort of really carrying on the rebound in equity markets That already started to get a little bit of traction earlier this week Some optimism that china and the us are likely to be able to sit down in october for further trade talks in washington, but this just seems an all too familiar narrative of Markets buying into a little bit of optimism only to be disappointed by subsequent treats tweets tweets or treats tweets From president trump. Let's not forget that it was only two or three weeks ago that equity markets Dropped quite sharply in the wake of jackson holes the jackson hole powell speech When the u.s president went on a rent about The fed not doing what he would like it to do and cut rates aggressively as well as Asking u.s companies to withdraw from china so There's still a significant amount of headline risk nonetheless We have seen A little bit more optimism creep into the markets over the course Of the last few days whether or not that's sustainable or not is another matter But what we have seen is a significant break higher In a number of key resistance areas so in the dachs for example Of the germany 30 we've broken above the 50 day moving average And could well look to retest 12300 if we also look at the s and p 500 We've also seen a break above the 50 day moving average as well as those recent row of peaks That came in at around about the 50 day moving average again In and around 29 45 29 50 so We're back to within touching distance of all-time highs For u.s markets and while european markets have largely underperformed It's been a fairly positive week Certainly for the dachs and the s and p not so much for the footsie 100 Which has struggled to get back above its 50 day moving average in the 7380 level So at the moment while we've seen breakouts in the s and p in the dachs The footsie 100 hasn't followed suit and that makes me a little bit suspicious of this equity market rebound Nonetheless, we've also seen a decent rebound in us treasury yields as we can see from this weekly chart here on the us 10 year This is the weekly candle here And that would appear to suggest that there could be a little bit more upside here in yields if that is indeed the case And we get a further sell-off in us treasuries. We might see A little bit of upside in equity markets, but i'm really am struggling to see why we would see Significant further gains against such a weak economic backdrop most of the data out of europe Has pretty has been pretty abject With respect to german industrial production and german factory orders, which were absolutely horrible And that leads me to focus i think On the upcoming european central bank rate meeting and there is a widespread expectation As we look towards the thursday meeting That the ecb will at least Cut their headline rates The headline deposit rate from minus 0.4 Which is already at a record low But if we look at the german 2 year and we look at the german 10 year Certainly the markets pricing in a much more aggressive easing than maybe The ecb Would be able or might be able to deliver It seems a given that the bank will cut rates But it remains unclear by how much Whether they will cut all three lending rates by the same amount And a big question is What other measures can the ecb enact in addition to the start of the TLTRO program? Which they announced back in april There has been some talk of asset purchases has been some talk of tiering To try and offset the Ongoing weakness in the banking sector and we've also seen a number of ecb policy makers Brief over the past few days that they're uncomfortable with the idea at this moment in time Of further quantitative easing And i think the ecb also has to be Attuned to the narrative that if they ease aggressively they're likely to get kickback from the us president About unfair currency manipulation the ecb's biggest problem remains that for all is all its efforts There's been no correspondent political heavy lifting Or fiscal easing which means that i think any new measures are likely to fail to lift demand and as such I think it's quite it's more than likely that The bar for the ecb Is likely to how shall we say it? Be for them to disappoint rather than over deliver We've also got the latest china trade numbers coming out For august and i think they're probably likely to be fairly weak if this week's triple r cuts Are any guide it seems to me that china the china's people's bank of china is getting out in front Of the market in easing monetary policy but In the context of what we're expecting with respect to euro dollar We can see from this daily chart here that we do have room I think for a little bit more Push to the upside in euro dollar. Look at this nice little daily hammer here. It's a potential hammer We've seen a strong upward candle here. We could we'll see further gains back to this trend line Which comes in roughly round about? one ten eighty one eleven the figure if the ecb Doesn't deliver a shock on all that currently I think is being priced into the market I still think the market is probably overpriced for the ecb will be able to deliver When it meets this coming thursday the 12th of september and say we've got china trade in august The most recent china trade numbers have showed that china the chinese economy appeared to pick up in july With exports to non- us destinations helping to drive a pick up of 3.3 percent, which was the best performance since march One of the things that I have noticed with respect to recent data is health services data Has continued to outperform broader manufacturing data. So you've certainly got a divergent Economy between services and manufacturing That's certainly true in the us where we've seen some decent numbers this week Out of the ism non manufacturing numbers prices paid was fairly decent As was total orders or new orders Employment was slightly weaker But overall the headline numbers were fairly decent and the adp payrolls report was also fairly good As I speak to you now Obviously, I don't have sight of the non farm payrolls report or the wages data for august But certainly I think if there's a decent number From us payrolls it's certainly going to feed into a narrative for the fed That's going to make them It's going to make it very very difficult for them to ease aggressively when they meet the week after the ecb At the moment 25 basis point. It's pretty much nailed on And the big question is is whether or not we get 50. I still think that's highly unlikely Even though we have seen James bullard of the st. Louis fed articulate a case for a 50 basis point rate cut at the September meeting It's also been a big week for the pound Various headline riskers with respect to brexit the prorogation of parliament One thing that we have seen Is that the pound has broken to the top side after making a new Multi-year low below 120 were around 1950 Didn't quite take out the 2016 flash crash lows But it really depends on where that flash crash low is because it's anywhere between 118 and a half and 119 and a half Nonetheless, we've had a very strong downward thrust On that before a very decent rebound Back above this downtrend line from the highs in april I think to really get confident that we're going to push further Upwards in the pound against the dollar. We really need to see a break of this red line here that I think seen around about 123 80 124 that for me. I think if we can break above that Momentum should be able to take us quite a bit higher and with that in mind We've got uk wages and unemployment data for july coming out Over the course of the next few days We've been subject to reports every month. We've been subject to reports of job losses across a range of sectors yet the unemployment rate Has stayed fairly anchored Around its lowest level since 1970s at 3.8 percent now We have ticked up a little bit in the past month or so to 3.9 percent And that sort of coincides with a marked slowdown in the uk economy Into q2 and potentially also into q3 the key thing for me Is wages growth now in june we saw that rise to 3.9 percent Which is an 11 year high and it was also the 11th successive month of wage gains of over 3 percent So it's pushed real wages growth up to a three year high The big question is whether or not that's going to be sustainable now We're likely to see that Tape her off a little bit with wage growth of 3.7 percent But nonetheless that still remains fairly positive when you look at actually the economic backdrop And the current fee brah atmosphere that we've got in west minster Now we could still get a new election. Well, we will get an election at some point I think that seems fairly certain Given the political shenanigans of the past few days the big question remains around timing and on monday We should find out we should find out whether or not the government will be able to get its wish of a pre-october the 31st Election or whether or not the opposition party is successful in making sure the election happens after the 31st of october And obviously how that plays out could well affect how the pound reacts over the course of the next few days One thing that has played out very very nicely Over the course of the past few weeks is this euro sterling Move that we talked about a couple of weeks ago when I talked about the bearish weekly reversal We've continued to push lower I think the prospect of further losses is likely to be tempered by The 100 day moving average and potentially the 200 day moving average below that But certainly I think as long as we stay below 90 80 or 91 the series of peaks here I think potentially We could well see further losses But we do have to keep an eye out for around about 89 in this area here Which prompted the move up to the highs that we saw in the middle of august So I think it's unlikely that we're going to see further aggressive sterling gains While the current political uncertainty is maintained throughout september and into october But nonetheless, I think in terms of euro sterling Things look fairly positive for the pound at this point in time What else have we got this week? We've got us retail sales us consumers still remained in fairly good fettle Despite president trump ramping up the trade rhetoric at the beginning of august to include all chinese imports to the us Consumer confidence only saw a modest drop off from the highs that we saw in july This was a surprise because I would have expected to be there to be a Much bigger drop off the big question is whether this will be reflected In us retail sales, which thus so far this year has fade has has been fairly strong The big question is can august continue the trend if it can again once again It will take the pressure off Um, the federal reserve to cut rates by more than 25 basis points that in turn will have a significant effect on the dollar So what else to look out for those are the key macro economic data points this week What else to keep an eye out for well i'm keeping an eye out for apple share price Um, they've got a product launch on september the 11th the new iphone 11 um Another upgrade another expensive upgrade I think it's going to be a fairly underwhelming underwhelming affair iPhone sales have been in decline for quite some time now the global economy is slowing I think it's unlikely to see that this slide in sales be arrested by a few By a few fancy upgrades and more importantly than that this new phone doesn't have 5g and we've already seen samsung Launch a new phone or we'll be launching a new phone which has 5g and it's foldable. It's a foldable slim So and that costs around about $2,000. So why would I pay over $1,000 for an iphone 11? That doesn't have 5g. I'd probably be better off waiting until next year. So have a quick look at this apple share price here Big resistance at $215 I'll be surprised if the market reacts significantly positively to that. These are the all-time years around about 220 So the 220 I think really is a big level on apple. We've also got Some decent numbers. Well, we're expecting first half numbers from wm morrison Food retail seen a little bit of an uptick in prices there in recent times But nonetheless that this sector has received a bit of an upgrade from some banks Not really convinced one way or the other that that is going to be any way sustainable. But certainly in terms of A retest of 190 if we get a move through 190 we could see a nice little move higher JD sports also has been one of the retailers that has outperformed near record highs Will this week's numbers for Well, will this week's numbers for the first half Reinforced the positive outlook for JD sports So that's it for the upcoming week. Sorry, this video has gone on for quite a bit But if you want to read more about the week ahead you can find um, you can find The article for the week ahead along with a copy of this video on the insight section under news and analysis Otherwise, that's it for this week. Thank you very much for listening Michael Houston talking to you from CMC markets