 Hello and welcome to CMC Markets on Tuesday the 19th of May and the weekly market update. And equity markets have got off to a fairly positive start to the week this week, not only in Europe but in the US as well, where we are now pushing above the previous record highs. We've had a number of false starts with respect to US markets. We've really struggled to make significant gains but I think we do appear to be now starting to push higher bias. I would suggest a fairly significant amount and I think it's largely as a result of the weaker data that we've been seeing out of the US predominantly but also some comments earlier this week by Charles Evans, the head of Chicago Fed and an FOMZ voting member where he's suggested that US rate rise may come as early or as late depending on your point of view whether you're a hawker or a dove of the first quarter of 2016. And that has seen the dollar, that did see the dollar initially weaken. Unfortunately for Mr. Evans that's prompted a bit of a counter response from the European Central Bank where we've had an ECB policy maker also suggest that they could front load their existing quantitative easing program as a response I think to the sharp sell-off that we've seen in European bond markets and that's sent Germany yields lower and sovereign bond yields lower and has had the added side effect of pushing the euro down against the dollar. The net effect of that has been to push the DAX higher and European markets in general an awful lot higher. So what I'm going to be looking at today in particular I think is the S&P 500 now that we've broken above the previous highs can we make further gains and given the declines that we've seen in Europe and particularly in the DAX and the Euro stocks 50 are we in the process of actually seeing a significant turnaround from the declines that we've seen in the past few weeks. Once I've looked at that I'm going to have a quick look at the pound against the dollar in the wake of those inflation figures that we saw out where we've seen UK CPI fall into negative territory for the first time ever. So let's make a start with the US S&P 500, the SPX 500 and we're looking at a daily candle chart and you can see the horizontal line that I've drawn across the highs that have been in place since the end of February. We've now finally pushed above those previous highs around about 2115, 2120 and we really need I think to sustain that move above those previous highs to suggest that we can push on towards 2150. Now tomorrow we've got the latest FOMC minutes. I don't think we can read too much into the contents of those minutes simply because those minutes are now fairly stale. They're from the Fed meeting of the 28th and the 29th of April. Since then we've had a payrolls number for April, which we got at the beginning of May and we've also had a whole host of what I would suggest is fairly underwhelming economic data out of the US. So since that Fed meeting the debate has moved on and I think it's very unlikely that we'll see any prospect of a Fed rate rise any time before Q4. I mentioned earlier in this video about the comments from Benoit Courier of the European Central Bank that the ECB would look to front load its quantitative easing program, which it started in March this year and I think this is in response to some concern that the recent sell-off in the bond market has pointed to essentially a lack of liquidity. So currently they're expecting to add 60 billion euros worth of QE per month over the course of the next few months up until, including September 2016. His comments would appear to suggest that that 60 billion could become 70 or 80 billion in June, July, maybe August and then subsequent amounts could be less than that as we head in to year end. The net effect of that particular comment has served to push the euro lower, but more importantly we've seen a significant rebound in European equity markets. So let's look at the German DAX because I think that was one of the markets that was most affected by the sell-off in German bond markets. So we can see from this four-hour chart of the DAX in front of me that we've broken the downtrend that we've been in since the beginning of April. What we're currently trying to get above at the moment is the 200-event moving average, which is currently capping these gains. So does this mean that the current downtrend that we've been in since the beginning of the month has turned around? Well I think, as with anything in technical analysis, I'm looking for confirmation and I use DAO theory to do that. So what's the closest correlation for the DAX? For me, it's the euro 50. And if we look at the similar euro 50 chart, same four-hour chart, we can actually see similar type of chart, four-hour chart, but we haven't broken the downtrend that we've been in since the highs that we saw at the beginning of April. So we'll finish up with the pound against the dollar and we've been in a very nice uptrend since the lows of April, around about 145.60. And we do appear to have topped out in the short term around about 158.20 and that can be shown by this daily chart that I've got up in front of you right now. Now we can see the tweezer top around about 158.20. We can also see a very small bearish engulfing day, which would appear to suggest that the time is ripe for a bit of a correction. Now my initial target is going to be the trend line support that I've drawn in from the lows that we saw in mid-April. And we can see that much better on a four-hour chart, which I'm putting in front of you right now. Now that trend line support comes in around about 154.20.154.30. So at the moment we've got a little bit of sterling weakness and that's largely on the back of that very weak inflation number that we saw earlier this morning, minus 0.1. I think what was more worrying more than anything else was the sliding core prices as well, which does appear to suggest that the weak inflation numbers are starting to drag other prices down as well. However, deflation I still don't think is a concern for the moment, simply because wage increases are running at over 2%. Certainly on the basis of the last set of data that we saw earlier this month. That being said, that 154.20.30 area is going to be a key support. If it breaks, we could see a bigger correction back down towards 152. The big question is, can we go lower? And I think that's a little bit of an unknown at the moment, simply because the likelihood is the Bank of England is likely to keep rates low for longer. The Federal Reserve is likely to keep rates lower for longer. And the ECB is likely to keep rates lower for longer. So there is no clear winner in the context of who's going to raise rates first. I think it's still likely to be the US Federal Reserve or the Bank of England ahead of the ECB. It's just the expectations for a rate rise are now starting to get pushed back, certainly in respect of the Bank of England and certainly in respect of the Fed. And you have to bear that in mind when looking at the price action in both euro-dollar and the pound. So in the short to medium term, we could well see further sterling in euro weakness. But overall, I think expectations of further dollar gains currently are, I think, still fairly limited. So that's it for this week. Once again, thanks very much for listening. This is Michael Huston talking to you from CMC Markets.