 Hello and welcome to CMC Markets on Wednesday the 6th of June and this quick review of the week beginning the 11th of June and it's been a fairly mixed week for European equity markets thus far. I think on the top side is being inhibited somewhat by concerns about the current trade talks that are going on between the US and China. There does appear to be some progress being made between the US and China. However EU and US trade talks appear to be stalled with neither party really wanting to back down from their entrenched positions and I think that's really going to be an ongoing concern over the course of the next few days and potentially the next two to three weeks as well. Now last week I looked at Eurodollar in the context of a payrolls report that at the time I did not have sight of but which by and large was a fairly positive report even though wage growth continues to come in slightly on the lower side. On the flip side of that we have the Euro which is being weighed down by concerns about political uncertainty in Italy. Certainly we do now have an Italian government but ultimately I think they seem quite intent on implementing the populist policies that they flagged up in their manifesto and that's likely to bring them into serious conflict with EU fiscal and budget rules and really I think how Brussels pushes back against those new measures could well determine what happens to the euro going forward. Certainly we're seeing the pressure being taken up with respect to Italian borrowing costs where they are heading back up again after settling down initially after some sharp spikes higher. Certainly the effect on Eurodollar it doesn't appear to be having a significant downward effect but certainly in the context of overall long-term direction I think there is certainly potential for the Eurodollar to go lower but in the short term we could see it move back to around about 1.19.20 1.19.30. Last week I talked about the Eurodollar and the bullish engulfing candle that we have on this particular chart here and the potential for a move back to 1.17.70 we've got that already over the course of the last two to three days I think there is potential for that to go even higher back to around about 1.18.30 and potentially even towards the 1.19.20 and the 1.20 area but I think it's going to be very very difficult for the Eurodollar to go significantly higher than that given that we look to be forming a bit of a death cross on the daily chart and we have a similar golden cross on the dollar index so we can see from the dollar index and we can see from the Eurodollar that there is potential for further dollar strength going forward we could see a little bit of a pullback towards 93 on the dollar index but if this plays out as the long-term directional indicator that it normally would do then the likelihood is that we could well see further dollar gains going forward and in that context I think it's important to look at what we've got on the agenda this coming week we've got the Fed meeting on the 13th of January and the likelihood is there that we're going to see an increase in interest rates that is not going to be a surprise it's largely priced in what will be closely scrutinized is the forward guidance that Fed officials give to the market with respect to whether or not we can expect one or two extra rate rises this year more importantly we've also got the ECB rate meeting the day after on the 14th of January June on the 14th of June and again here forward guidance will be key given comments by Jens Weidemann and Peter Prett that they expect inflation expectations to start hedging higher again and that they will be and these are reports that they will be discussing the end of the asset purchase program which is going to be unfortunate timing for Italy given the fact that borrowing costs in Italy are edging back up towards the highs that we saw in late May now people are getting a little bit excited about the fact that Italian borrowing costs are heading back towards 3% and certainly that is much higher than what we've been used to in recent months but if you go back prior to 2008 Italian 10-year yields were trending at around 4% so Italy can sustain borrowing costs around 4% might start to get a little bit worried if they go significantly beyond that for any length of time but certainly at 3% in terms of the 10-year yield it's eminently manageable in the short term but of course a lot will also depend on how the ECB buys Italian bonds and how it pumps liquidity into the Italian banking system if they insist on not following EU fiscal rules so a big week for the Fed it's a big week for the ECB it's also a big for the UK it's also a big week for the UK economy we have UK wages we have UK unemployment and we have UK CPI on the 12th and the 13th of July now the Bank of England downgraded their inflation forecasts for this year and 2.5% personally I think a little bit unwise to do that I think given what we've seen with respect to oil prices inflation could prove to be an awful lot stickier than I think the Bank of England is expecting and certainly I think in terms of the jump that we saw in EU inflation last month from 1.2 to 1.9 which went from the lowest of the year to the highest of the year then the 2.5% UK CPI not 2.4% UK CPI number there is a distinct possibility that number could edge up what I'm particularly interested in is the wages numbers can we sustain that 2.9% that we saw in the previous months numbers if we can that should be broadly supportive of sterling always assuming that there aren't any Brexit surprises we've also got Chinese industrial production Chinese retail sales for May recent may PMI days it does appear to show that the Chinese economy is bouncing back a little bit retail sales have been a little bit soft that is a worry looking to see that bounce back also looking to see whether or not fixed asset investment bounces back after coming in at its lowest level since 1999 in April last but by no means least we've also got the North Korea US Summit in Singapore that could introduce a significant amount of noise to equity markets going forward so quite a few items to keep an eye out for this week Federal Reserve European Central Bank UK data China data and the North Korea South Korea US Summit as well as obviously ongoing discussions about trade that's it for this week thank you very much for listening it's Michael Houston talking to you from CMC markets