 Hello and welcome to CMC markets on Thursday the 1st of March and this quick look at the week beginning the 5th of March But before we get to next week events of which there are many I'm gonna have a quick preview of the market performance over the past Few days and we come off a very difficult February for Global stock markets. We've also seen thus far a fairly positive week for the US dollar As well as a positive month for the US dollar index first positive month since October last year And we're approaching we're approaching this very key resistance level that I've talked about in previous videos around about the 91 level on the dollar index And between 91 and 91 20 and that's that suggests that there is certainly some Potential momentum for further dollar upside on a break above this key resistance level And I think what's important about this particular? This particular resistance level is the fact that the dollar has started to strengthen on the basis of a much more hawkish Fed We've had a new Fed chair Jerome Powell Talking up the prospects for the US economy talking up the prospects For US rate hikes and yet one can't help feeling that maybe mr. Powell is getting slightly ahead of himself because what we've seen over the past few days is Economic data that does appear to be showing a little bit of softness from the US economy now I know that historically Q1 the first quarter in the US tends to be a fairly weak affair We've seen it in 2017 we saw it 2016 and we also saw in 2015 So it wouldn't be surprising to see some fairly weak economic data But we're also seeing softening as well in European data More broadly in the PMI numbers as well as weaker inflation Which would appear to suggest the demand appears to be slowing down? So I think with the fact that we've got the European Central Bank rate meeting coming up next week We've got a Bank of Canada rate meeting coming up next week. We've got US non-farm payrolls We've also got the latest wages data I think we're going to be paying particular attention only to those decisions, but also to the fact that The central banks what sort of what sort of outlook will the central banks be looking at in terms of their inflation? Expectations because while we're not expecting any moves on monetary policy next week I think how those central banks guide in terms of future inflation expectations as well as obviously the whole host of Services data that we've got coming out next week the ISM non manufacturing data out of the US in particular In terms of the prices paid data what we've been seeing is we've been seeing strong economic data in terms of prices paid Over the last few months coming out of the US But we haven't really seen that start to filter down into the headline inflation numbers Even though we did see a big jump in wages in the previous payrolls to 2.9 percent That's still expected to be Sustainable around about those sorts of levels and that's largely as a result of big increases in the minimum wage you in the minimum wage Levels for a number of US states But the big question I think for me is whether or not that can be sustained whether the narrative being pushed by Jerome Powell In his recent Humphrey Hawkins testimony really justifies The prospect that we could see for US rate rises this year and that's one of the reasons I think we've seen the dollar starting to push higher on the back of Some of that particular hawkish narrative that we've been seeing what that has been coming out of the Fed What has been strange however is that US bond yields haven't been following so in fact the yield curve has actually been flattening It was around about 0.78 Percent basis points between the tenure and the two-year a few weeks ago. It's now come back into 0.6 so there's a number of Things going on at the moment that are completely Moving at odds to the prevailing narrative at the moment But the key level for me remains the dollar index around about 91 which also coincides coincidentally and I've talked about this previously Euro dollar One 2160 now this could be the potential for a double top reversal We look as if we're about to break below the 50 day moving average As well as that very key Support level that I outlined earlier Earlier in February one 2160 it was also a Fibonacci retracement level of the entire down move From the 140 highs to the one 103 lows So that's now acting as a little bit of a support area if we break below that then we've got a potential for a double top move 125 to 121 down to around about 119 still keeps the overall uptrend intact But it certainly does delay the prospect of further Euro dollar gains on the basis of the fact that ultimately The expectation is that the ECB will dial back its asset purchase program by the end of this year We inflation numbers could undermine that as Could a couple of events that are taking place this weekend We've got the Italian elections the likely outcome from that is going to be a hung parliament I think really the really the big question is is how the percentages play out because I think if you get a government that is probably slightly more anti-euro and Anti-reform then I think that's that's potentially going to be particularly negative for the euro as well as the Italian stock market and stock markets more broadly so keeping on the Italian elections, but also on the latest vote from the members of the German SPD now everyone's been Reacting as if the new new German government is a done deal The SPD coalition needs to be ratified by grassroots members if that falls apart Then ultimately we could see another election in Germany Whichever way that vote goes Even if they vote to form a new German government with Angela Merkel, it's likely to be a very fractious affair. It's likely to be I think founded on a very thin ice Simply because the SPD is really damned if it does and it's damned if it doesn't they're trailing badly in the polls if they go into Coalition with Mrs. Merkel They will probably lose an enormous amount of vote share and yet if they go into opposition and decide not to support Mrs. Merkel they'll probably get wiped out in the polls anyway There are no good options for the SPD So I think the vote is likely to be fairly tight But ultimately whichever way whichever way it goes It's unlikely that any new German government is likely to be a particularly strong one so Those those those two those two factors at the weekend could actually drive the direction of the euro over the course of the next few days But we've also got the European Central Bank rate meeting which is due out on Thursday Mr.. Draghi's press conference will be particularly interesting in that context given the weak inflation numbers that we've seen come out From Germany France and Italy. We did see a big jump in the Spanish numbers But I think that's largely a one-off factor Ultimately headline inflation in the European Union is the lowest It's been since 12 months ago when it was around about 1.9. It's now around about 1.2 percent So there's no signs of inflation repression there We've also got the latest services PMI data for February from across the European Union China as well as the UK We've got the latest China trade data And we round off the week We finish off the week with the latest non-farm payrolls US employment report expecting a number around 195,000 slightly down from the 200,000 that we saw in the January numbers But more importantly keep an eye on those wage numbers because they're at 2.9 percent in January If the wage growth that markets are concerned about is Going to be sustained then we really need to see that come in in and around that 2.9 percent level If it comes in slightly weaker, then we could then Conversely see the dollar sell off, but I'm not expecting that to moderate Particularly sharply over the course of the next few months and the pound is obviously going to be in the spotlight as well Given the disagreements currently being played out in the media between the Brussels between Brussels and the UK with respect to The Irish border. So that's it for this week. Thanks very much for listening to Michael Houston talking to you from CMC markets