 Good morning and welcome to CMC Markets on Friday the 14th of December and this quick look at the week ahead beginning the 17th of December, coming off the back of a fairly roller coaster turbulent week for equity markets as well as currency markets. The political backdrop for Brexit looks no less complicated even if you set aside the confidence vote that Prime Minister Theresa May was finally able to overcome, draw a line under with respect to her leadership of the Conservative Party, but ultimately given the fact that 117 MPs voted for her to go, I think really highlights quite starkly the problems that the Prime Minister faces in getting this withdrawal agreement across the line. It still remains far from certain that the UK Parliament will be able to coalesce around any sort of agreement between now and the 21st of January which ultimately is when the deadline is for either voting on this deal or looking for a Plan B. Now there are a number of Plan Bs being touted around, the biggest question at the moment is what if any of them have a majority in the UK Parliament. At the moment the consensus on that it appears to be between slim and none. So for the moment the Pounds got a little bit of a boost on the back of Theresa May getting past her confidence vote, which generally means that they won't be able to oust her for the next 12 months, but does it bring any more certainty to the Brexit proceedings? Not really. That being said we've seen a bit of a rebound off 124.80 in the Pound and we can see that illustrated on this chart here and what's quite interesting is that we do appear to have posted a modestly bullish reversal on the daily candle. Now while that is modestly bullish I think I'd want to see confirmation of this move on a move back into this triangle breakout around about 127.40, 127.50. This is essentially where I see the resistance levels coming in. We can drift all the way back towards 125.20, 125.30 without undermining this bullish key day reversal. So keeping a very close eye on that we could see further sterling gains while above these lows at 124.80. Now obviously the big question is what's going to drive those sterling gains and I think that really is the big question and it could be next week's Fed meeting. The Fed is largely expected to raise rates for the fourth time this year but it's less of a done deal now than it was say for example two or three weeks ago. We've come off the back of what I would suggest is some fairly weak global economic data. We had the Chinese retail sales data for November. We had Chinese industrial production data for November. We've had French PMIs for December which have both dropped into contraction territory for services and manufacturing and the composite is at its lowest level since February 2016. It actually beggars belief that the European Central Bank could even consider looking at raising rates at the back end of 2019 against this sort of economic backdrop. It is apparent to me that ultimately the global economy is slowing down albeit fairly modestly but in some places it is slowing down quite sharply and actually Mario Draghi himself said in his ECB press conference that QE was the only thing that was actually causing certain areas of economic activity to continue in 2018. Well that is a startling admission for a man who is actually pairing back the asset purchase program or the ECB and potentially talking about rate hikes in 2019. So I think that's wishful thinking on the part of the ECB. Markets are starting to price that out and the big question at the moment is what the markets will start to price in for 2019 for the US Federal Reserve. For the here and now if we look at the German DAX we can see that there is big big resistance on around about the 11,000 area. Given that we've broken out of this sideways consolidation here while we're below 11,000 I can see the prospect of further losses in the DAX towards ten and a half thousand over the course of the next few trading sessions. This Santa Rally that I think people are talking about it may well happen but it may well happen after a further decline towards that ten and a half thousand level in the DAX. If we look at if we look not only at the DAX but we look at say for example the FTSE 100 here we can do the same thing with this chart here. We've had a brief rebound on the FTSE 100 but again we haven't been able to get back within this triangular consolidation breakout that we saw breakout at the beginning of December. If I draw a trend line through the highs here we can see this triangle breakout should project to move lower down to around about six thousand six hundred six thousand five hundred in the short to medium term. The only thing that would negate that is if we the price action here moves back in to the triangle breakout that we saw occur at the end of November. So those are the key those are the key levels on the DAX and the FTSE 100. If we look at say for example the pound we've already looked at the pound if we look at Euro dollar we've once again broken down towards the lows that we saw at the beginning of November and again I think that's going to be a key level for me one twelve twenty I think further disappointing economic data out of the Euro area in the coming weeks is likely to put further pressure downward pressure on the Euro always assuming of course that the Fed doesn't change its guidance at its meeting on Wednesday. Now at the moment it's not really about whether or not the Fed raises rates in December it's what their guidance in the dot-plot path will be for 2019. Markets are slowly pricing out the possibility that we're going to get two or three rate hikes next year from the Fed. If anything I will be surprised if we get one given the direction of travel for economic data globally I think there is an outside chance the Fed could cut next year. I think the earliest that's going to happen is probably Q4. Markets are not currently pricing that in I think it's still quite some time before we get there but ultimately I wouldn't rule out the possibility that twelve months from now the Fed could be cutting rates and if that does happen we could we'll see a little bit of dollar weakness start to play out even though we're getting quite a bit of dollar strength at the moment. I think it's been fairly I think it's been fairly instructive if we look at say for example dollar yen and we look at the fact that it's not really been able to get much above this trend line resistance from these peaks here that the every resultant rally from the lows has been slightly lower and the price action is starting to compress. At the moment we're above the cloud and while we're above the cloud we're just about clinging on to the uptrend but if that cloud breaks then we could come back to around about 110. So keep an eye on this resistance line here which comes in just above one 13 81 14 and then obviously good support around about 112 and a half. What else are we looking out for next week? We've got UK inflation and UK economic data continues to look fairly positive wage growth increased to 3.3% in the three months to November so that was that was fairly three months to October so that's fairly positive inflation could well fall back to 2.3% in November given this sharp decline that we've seen in oil prices we've also got CPI for November for the European Union that's the headline number and that could well fall back towards the ECB target of 2% from the 2.2% that we saw in October but I'm more interested in core prices and core prices still remain very weak the highest core prices have been in the last nine years has been 1.1 1.2% so they're around about 1% inflation still remains very benign we've also got Bank of Japan rate decision against a slowing Japanese economy a 2.5% contraction in Q3 unlikely to see really anything from the Bank of Japan next week status quo on the 20th we've got UK retail sales for November on the 20th and I'll be paying particular attention to them to see whether or not Black Friday sales have really prompted UK consumers to really up their spending for November after a disappointing October and we've also got Canadian CPI and retail sales as well as earnings from FedEx in the US and they're usually a decent barometer of consumer demand Amazon Prime shopping and that sort of thing if we get decent numbers from FedEx that would suggest the US consumer is still ordering quite a lot online so that's it for the week beginning the 17th of December thank you very much for listening to Michael Houston talking to you from CMC markets