 Hello and welcome to CMC Markets and this is the preview of the week beginning 17th of July. The main focus of my attention this week is going to be on the latest UK inflation data in light of the wages data that we saw earlier this month, which came in at 2%, a slight increase from the 1.7% that we saw in April, and also be looking at UK retail sales for June as well, in light of the disappointing number that we saw in May. And certainly I think the health of the UK consumer has been a concern in the second quarter of this year, particularly since average earnings have fallen significantly below the level of inflation. So I'll be looking at UK inflation this week and UK retail sales in the context of a continuing debate I think on whether or not it will be wise to reverse the rate cut that we saw the Bank of England implement in August of last year. And that also ties into a wider debate about central bank policy more globally in light of the rate hike that we saw from the Bank of Canada, which followed on from the rate hike, the third rate hike, that we've seen from the US Federal Reserve in the last seven months, which we saw them implement in June. So the big question I think is are central banks starting to consider quite strongly the prospect that we could well see a slightly tighter monetary policy going forward? Certainly bond markets do appear to be reflecting that so-called new normal, and we're sort of seeing that in this chart that I've got here in front of me, this Bloomberg chart here. In the past two or three weeks, we've seen bond yields, not only in UK guilts but also on German bonds jump quite substantially on the basis that there is a perception now that central banks more globally are looking less about more stimulus and looking at more about pairing back that stimulus. Certainly comments made by ECB President Mario Draghi at the end of June would appear to suggest that that is the discussion that is going on behind the walls of the governing council at the ECB. We could well get some colour on that on Thursday when the ECB meets for its latest policy meeting. I think it's unlikely that we'll see any new indicators as to whether or not the ECB will look to taper its 60 billion euro a month stimulus programme, but I certainly think there is some speculation that they could outline a plan as soon as the September meeting and even before that at the Jackson Hole annual symposium which takes place at the end of August. So in the context of the way euro has gone, that could be a very, very interesting discussion over the course of the next few weeks. Certainly it's been reflected in the performance of the euro dollar and I think the performance of the euro has also been helped by the fact that Janet Yellen, chairwoman of the Fed, was slightly more dovish and affected by investors in comments to US policy makers at a Humphrey Hawkins testimony. Her comments about inflation and her comments about a much lower neutral level of interest rates would appear to suggest that potentially the Federal Reserve could have done the bulk of the heavy lifting when it comes to interest rate hikes and ultimately their focus now is more on balance sheet reduction. I think something that she's probably likely to get a much better consensus for on the FOMC than the possibility of future rate rises. And I certainly think that's been reflected in Fed fund projections with respect to the possibility of a rate rise this year. It's a less than a 50% probability that we'll see one more rate rise before the end of this year. In fact, it's more likely that the Bank of England could well reverse the August rate cut that we saw last year by the end of this year. Given some of the recent data, that still I think remains very much a 50-50 bet. But certainly I think given recent comments by Andrew Haldane, the Bank of England's chief economist, it has appeared to be slightly more of a discussion about the prospect of at least reversing the rate cuts that we saw last year even if it doesn't mean a complete reversal of the current easy monetary policy. In fact, comments by Ian McCafferty would appear to suggest that he's in favour of potentially tapering back quantitative easing as well. So we may not be having a discussion about a rate hike. We could actually be having a discussion as we head in towards the end of this year where the Bank of England actually starts thinking about withdrawing its current stimulus package. So that also ties into the rebound that we've seen in UK guilt yields. So what does this mean for currencies more broadly in terms of what to expect? Well, I think a lot will depend on this week's inflation data. UK CPI is currently running at 2.9%. And I think there is a good chance that that could well soften over the course of the next few months. Certainly I think in the context of what we've been seeing with respect to oil prices is helping, I think, temper inflation expectations even if the weakness of a pound isn't helping. But what we have seen over the course of the past few days is we appear to have found a little bit of a base around about 127.5%. Despite that brief drop below it in the middle of June we were able to reverse it quite quickly by running into a barrier around about 130.40%. That, I think, for me is the big level on the cable at the moment. If we can get through 130.40 and we could go for a little bit of a run to the upside but I think a lot of that will also depend on how weak or otherwise the dollar is over the course of the next few trading sessions. I think what's more important in the context of the euro-dollar is where the euro-dollar goes to next. We do appear to be finding a decent area of support above this 113 area which I highlighted as a previous resistance in the early part and in the middle of June. Now that we're above that we do appear to be finding a little bit of support above there. But what is particularly interesting, I think, with respect to the euro is that on some of the crosses we do appear to be showing some signs of a little bit of topiness, if you like. If we look at euro-yen, for example, we can see on the daily chart here a potential bearish reversal there on euro-yen which could suggest that maybe we could go for a little bit of a trip to the downside towards 125.80% and these previous highs through here through May. We haven't as yet been back towards that. Certainly, this does appear to suggest that there is a little bit of selling interest up around the 130 area but we've also seen a similar sort of a daily reversal on euro-stirling as well over the course of the past couple of days. So certainly be keeping an eye on euro-stirling and the euro-yen for further evidence as to whether or not we're going to see potential sterling strength over the course of the next few trading sessions. We're going to wrap this up with basically talking about UK retail sales. There has been some concern that UK consumer has been pulling back over the course of the previous month simply because of the squeeze on average incomes. Certainly the May retail sales numbers that we saw were very disappointing. They declined 1.2% but that has to be put in the context of a 2.3% rise that we saw in April. As far as the British retail consortium has been concerned their retail sales numbers were quite encouraging at plus 1.2%. So will the June ONS retail sales numbers be as encouraging? The forecast is for them to come in around about 0.4% but that could go either way given how wages and inflation is unfolding at the moment. But that's really it for this week. Keep an eye out for the ECB, the Bank of Japan, the UK data, UK inflation data and UK retail sales data. That's it for this week. Thanks very much for listening. This is Michael Houston talking to you from CMC Markets.