 Hello and welcome to CMC Markets on Friday the 11th of May and this quick look at the week ahead beginning the 14th of May and there are a number of key factors that I'm going to be focusing on in the upcoming week. We've got UK wages data, UK unemployment data, Chinese industrial production, Chinese retail sales, US retail sales and European CPI and European markets have looked to be on course for their 7th successive weekly rise. You can see that in this DAX chart here the breakout above the 200 day moving average just a few days ago has been the catalyst for a significant ratcheting higher, not only in German equities but equity markets in general. A large part of that has been down to a slightly weaker euro taking the pressure off German exporters in particular but also I think European exporters in general but also I think there's been a slightly softening inflation outlook and that's been reflected in US Treasury yields which haven't as yet been able to gain a foothold above 3% and I think that's also helped US markets in particular start to put in a decent performance particularly this week after two weeks of pretty much trading sideways. We can see that in the S&P 500 here, we've broken above this downtrend line here, ratcheted higher, we've also broken above the highs that we saw in April and if we look on the weekly chart we can see that we're on course to post the biggest or the best weekly gain in US markets since early March when we posted a very strong rebound here. So I think all the concerns that we had at the beginning of this year have ebbed away to a certain extent but I still think there are significant risks to the outlook out there because while on the headline numbers inflation does appear to be showing signs of softening a little bit, you've only got to take one look at oil prices to realise that potentially markets could be storing up problems for themselves. Certainly the Bank of England's attitude towards the inflation outlook appears to be extraordinarily complacent when you consider that they downgraded their inflation forecasts not only for this year but for next year as well and this is despite the fact that oil prices since the middle of the summer have risen by over 60% and that has been reflected in the pump prices here in the UK which have gone from around about 118, 119 a litre at the beginning of the year to around about 126 a litre. Now even in the US you're seeing a little bit of a consumer spending squeeze with pump prices there up around $3 a gallon level which in US terms is fairly high. So if we look at Brent Crude we can still see from this chart that we're on course for that $80 a barrel level that I talked about just over a week ago in one of my periscope updates there was an awful lot of skepticism that we would be able to consolidate and move above this $71.65 level but ultimately you just trade what you see and given the fact that we were able to really hold above this really key resistance level around about $71.65 at the beginning of this year and haven't as yet been back below it the line of least resistance for markets is to go higher while we're above this key level and the next level that we're talking about is $82 a barrel which is this $61.8 Fibonacci retracement level of the entire down move from the 2014 peaks to the 2016 lows. So for me the inflation risk still remains a clear and present danger to the current advance that we're seeing in equity markets. This is despite the fact that some of the headline inflation numbers that we've seen coming out not only from the UK but also the US, the EU and China have been slightly softer than expected Chinese CPI this week came in at 1.8% as a big drop from the March numbers of 2.1 we've got EU CPI coming out in the coming week now let's not forget that's down at 1.2% on the headline number on core it's at 0.7 which is just above the lowest level that it's been in the last 10 years and US inflation has started to show a little bit of softness on the CPI measure around about 2.1% and while US Treasury yields 10 year Treasury yields remain below 3% the outlook with respect to the bond market is telling us a completely different story so what commodity prices are telling us so one of these markets is wrong either commodity prices are wrong or bond markets are wrong and we need to be very cognizant of that as we head in to what could potentially be an eighth positive week for European markets when we come back next week so the key data that I'm looking out for this week are UK wages they are out on Tuesday and they could have a big they could have a big effect on where we go to next with respect to the pound now the latest Bank of England meeting was probably on the dovish side the Bank of England would have us believe that they still think rates are going to rise sooner rather than later unfortunately the market I don't think is listening to them anymore we've been led up this particular garden path once too many times since 2014 and like the grand old Duke of York Mr. Carney has walked us all the way up the hill and then walks all the way back down again so at the moment we have to trade what we see we've broken below this 13720 level which is a potential double top here which leads us to believe that ultimately the direction of travel is likely to be for a weaker pound a slightly stronger dollar and that will continue to be the case unless we can get back above this 13620 area that is capped most of the rebound from 13450 13460 at the moment we're near the lowest levels this year if we break below 134 and a half then I think the potential for us to move down a little bit lower to around about 133 and 132 and a half is you know it's quite a realistic proposition while we're below these key resistance levels here 13620 and 13720 as well euro dollar again we've found a little we look as if we're getting a little bit of a rebound at the moment after making a low of around about 11820 we've come to within 30 or 40 points of our minimum price objective of this breakout here we've posted a potentially bullish candle here but what we really need to do is break above 11950 and head back towards the 200 day moving average at 12010 12020 we need to then consolidate this move above 12020 and move towards 121 to really I think stabilize in the medium term and move higher with respect to Chinese retail sales we saw a bit of a jump in the last numbers to around about 10% I think a large part of that was down to the timing of Chinese New Year industrial production however still remains pretty weak around about the 6% level US retail sales expecting them to come in around about 0.4% that's a slight softening from March is at 0.6% I think the direction of travel with respect to retail sales is likely to still remain a little bit on the softer side and ultimately I think how these numbers come out next week with respect to the US the UK will determine or not whether or not the highs that we've seen in the dollar this week continue to make progress and move higher or whether we get a little bit of a stabilization in the short term and a bit of a consolidation a current levels of pullback in the dollar index from the highs seen thus far so that's it for today and this week thanks very much for listening Michael Houston talking to you from CMC Markets