 Hello and welcome to CMC Markets on Friday the 16th of February and this quick look at the week ahead beginning the 19th of February and it's been a much more positive week for not only European equity markets but US equity markets as well and a large part of the rebound that we've seen this week has been driven largely by US equity markets and we can see that being played out on the S&P 500 right now. This time last week I talked about the fact that I was a little bit reluctant to call for further declines in the S&P because of the fact we were above the 200-day moving average and we can see quite clearly here that it has held quite nicely. What we're now doing is looking to rebound back through the 50-day moving average and we've done that but at the moment we're looking to test the 61.8 Fibonacci retracement level of the entire down move of the last two weeks. So I think how the S&P reacts around 2745 is going to be quite important in the context of where we go to next and what is surprising is that even though we've undergone a significant rebound in equity markets, bond yields still remain pretty much where they were a week ago. In fact, they've gone quite a bit higher so I think the inflation scare that we were worried about a week ago, equity investors appear to be less concerned about it and maybe that's maybe one of the reasons behind that is the fact that the perception is the global economy will continue to grow in a way that sort of compensates for higher rates but I'm not totally convinced by that because if we look at this week's inflation data out of the UK and the United States, both numbers came in above expectations, UK inflation came to 3%, we're expecting a minor decline to 2.9%, more importantly US CPI stayed where it was at 2.1% and markets were looking for a decline to 1.9% and what was notable was that while inflation stayed fairly hot, retail sales did not because the UK retail sales came at 0.1% which was significantly below expectations and more importantly US retail sales came in short in January but also the December numbers were revised lower so maybe higher prices are starting to impact consumer spending in a significantly adverse way. That being said, we've seen a nice little rebound in US markets led by US markets pushing against resistance at 27.45 on the S&P 500. If we look at a similar pullback in the DAX we can see that the higher euro has taken some of the edge off the rebound in the DAX as shown by the Fibonacci retracement levels that I've drawn on this particular chart here. At the moment we're really struggling to gain traction above the 38.2% retracement level from the highs in January to the lows that we saw earlier this month so I think at most we could probably move back to around about 12,648 and that would be the 50% level on these two peaks here if we can sustain the move beyond 12,430 which is the 38.2% retracement level. Now last week I talked about a potential reversal pattern on the euro-dollar evening star that transpired that didn't particularly transpire particularly well but as I said at the time candlestick patterns really need confirmation to play out so even though on the weekly candlestick chart the evening star reversal has been negated if we look at the daily chart we still have struggled to take out the previous high at 125.40. More importantly and I think this is important we still have the 61.8 Fibonacci retracement level of the entire down move from the 2014 peaks to the lows that we saw in 2016-2017 at 126 acting as a much bigger resistance level in the longer term. So while we have seen marginally higher three-year highs on euro-dollar what's significant about this particular candle is we've made a new high but we're currently now trading in negative territory for euro-dollar. If we translate that across to the dollar index again we've made a slightly lower low but again on this candle chart here we haven't been able to sustain the move lower so what's probably happened here is we've taken out a few dollar long stop losses and are now squeezing back higher again. What is also significant is the fact that dollar yen has broken out to the downside as well and that could augur in a significantly stronger yen which could act as a bit of a drag on the rebound that we're seeing in the Nikkei 225. So we've looked at the events of the last week or so now let's look at the week ahead because there's a couple of items that I will be paying particular attention to this week one of which is UK wages UK inflation is at 3% there is an expectation that wages here in the UK are likely to continue to accelerate from the current 2.5% level that they're growing at in the three months to the end of November in the numbers that are out this week unemployment is expected to remain at 4.3% at 42 yellow but also wages are expected to continue to rise from the current 2.5% and head towards 3% if they do that then ultimately expectations of a May rate rise from the Bank of England are likely to gain traction even more than they already are. We also have 4th quarter GDP the second iteration of UK 4th quarter GDP that's expected to remain unchanged around about 0.5% might see adjusted slightly higher to 0.6 but nonetheless it's expected to show despite the fact that consumer spending remains fairly lacklustre at the moment the UK economy grew fairly decently in the fourth quarter we also have the latest Fed minutes now the Fed minutes aren't really going to tell us too much with respect to how the Fed views the overall economy and more broadly the stock market because of the fact that we've had a significant amount of volatility since that meeting took place but the Fed did upgrade its outlook for inflation on a 12 month basis we're seeing that play out in now the headline numbers and we're also seeing US data come in fairly mixed some good some bad but overall plain painting a picture of a US economy that is fairly resilient and where inflation is now starting to gain traction as a result expectations for a March rate rise from the Fed are now at 100% so really it's a question of not whether they raise rates in March but how many more rate rises come after that and I think that's what markets will be predominantly focused on with respect to the minutes also coming out next week is a big week it's a big week for bank four year results from HSBC Lloyds RBS and Barclays so that's going to be a big story for next week and also the latest German IFO survey what I'll finish off now with is a little quick look at the cable chart once again the rally that we've seen this week is starting to run into a little bit of a wall just below that 142 level well I think what is important with respect to this cable chart given all the Brexit uncertainty and everything else is how resilient it continues to be but we are still well short of that really big resistance line that I've drawn on my weekly chart from quite some time ago now 2015 peaks at around about 143 so if we do get some further dollar weakness which looks increasingly likely the pound I think will continue to struggle and trade in a range between 138 and 142 so that's it for this week once again thank you very much for listening this is Michael Houston talking to you from CMC Markets