 Good morning and welcome to CMC Markets on Friday the 18th of Jan and this quick look at the week beginning the 21st Of January before we look ahead. Let's have a quick look back at the events of the last few days and we're pretty much on course for the fourth successive weekly gain for US markets since the middle of December and I think this is a little bit surprising given that it's coming against a backdrop of what has been some disappointing economic data particularly at the beginning of the week out of China which saw import data and export data both slide back quite sharply in December but I think a lot of the negativity around the deterioration in the global economic outlook has been offset by an acknowledgement of the fact by central banks and and Authorities in general that the prospect of further tightening is now much less likely than it was say for example This time a month ago this time a month ago We just come off the back of a US rate rise and an expectation that the Fed was likely to start to increase rates At a slightly slower rate, but albeit at a continued rate of knots from what it was doing in 2018 that has changed That's changed over the past few days We've had we've seen Chinese authorities add to the stimulus measures from the beginning of the month when they cut triple our requirements. They've also Made some tax changes They've added further stimulus to the banking system and there is now a lot more optimism around the trade outlook Then there was this time a week ago now That's not to say that the US and China Will miraculously arrive at a trade agreement over the course of the next few weeks, but I certainly think the incentives for one Have increased given the fact that we've seen Concerns about the global economic economic recovery Starts to increase going forward There's been a significant change in tone from central bankers as a whole not only in in China and Europe But also in the US and I think The fact that the Fed has signalled it's likely to go on pause for quite some time has given investors Reasons to to get back in to the market. So as a result, we've seen The German DAX continue to push higher up towards that 11,000 level on the 50-day moving average and US markets On course to post the full success of a weekly gain The one lagger to that has been the FTSE 100 which has underperformed a little bit after briefly hitting 7,000 Earlier this month, but nonetheless there does seem to be Some evidence that markets could be on the cusp of putting in a short-term base Earnings announcements have also come out come out slightly better than expected. We've seen some good earnings We've seen some not so good earnings Obviously we look at banks in particular Goldman Sachs JP Morgan and Citigroup came in slightly better than expected On the flip side to that we've seen Morgan Stanley and Society General miss expectations so again Been a bit of a mixed bag but certainly nothing to make you think that the the global economy is on the cusp of a significant slowdown and that's before you even start talking about Brexit and Obviously the events of the last few days have taken center stage But the pound continues to push higher Theresa May lost her Brexit vote 432 votes to 202 It's not just a defeat was absolutely smashed out of sight But markets appear to be drawing the conclusion from that defeat that ultimately what we will see is some form of Deal come out of the ashes of that defeat I remain a little bit skeptical about that because for all of the political noise Circulating around Westminster about the fact that a no-deal Brexit has become much less likely That is not the default position when it comes to what's on the table right now What's on the table right now is that the UK will leave the European Union on the 29th of March and less MPs can coalesce around some form of deal to reverse Article 50 because the default position at the moment is that is that the UK will leave the EU on the 29th of March Unless article 50 is revoked unilaterally by MPs by a majority or The MPs go to Brussels or the Prime Minister goes to Brussels and asks Brussels for a temporary extension to it Anything else everything else is just noise So there's either a deal there's a revocation of article 50 or there's an extension of article 50 All three of those options have to be approved by a majority of MPs between now and the 29th of March Otherwise no deal becomes a reality Given the current arithmetic in the houses of Parliament that still remains a big ask and I don't think the move hiring cable reflects that and as such I think I would expect Volatility in the pound pretty much across the board to remain a very very high Despite the fact that we have moved higher four weeks in a row We are approaching some key resistance levels on the pound against the dollar 130 is one The next one is the 200 day moving average and also the trend line resistance from the June peak So I think the upside is still likely to remain fairly limited in the absence of any sort of deal Resolution whatever you want to call it on the data front coming up over the course of the next few days We have got the world economic forum from Davos and a Big a big waste of time if ever I came across one, but ultimately there'll be an awful lot of media coverage about it It's basically where CEOs politicians economists and other global influences Gathers to discuss how to deal with the myriad of problems that affect global politics and business in an effort to make the world a better place Now this has been taking place every year for the last however many years and judging by the state of the world right now I would suggest that it's probably not been particularly effective nonetheless There will be an awful lot of media coverage about it. I will be paying particular attention to the following data items Next week starting with China fourth quarter GDP due out on Monday That is likely to disappoint to the downside as is Chinese retail sales and industrial production the November numbers for These were disappointing retail sales came in at 15 year low in November of 8.1 percent I would be very surprised if that improved significantly given the import export data that we saw out earlier this week Industrial production was 5.4 percent in November again not really expecting a number Much improved from that and Chinese fourth quarter GDP is likely to come down from the 6.5 percent that we saw in Q3 So that's Joe on Monday, then we have The Bank of Japan rate decision as well as the European central bank rate decision And I think that is one particular of the two central banks I think the most important central bank rate decision will be the ECB's rate decision and that is due out on the Thursday and I Think for me It'll be very very important in the overall scheme of things the tone of Mario Draghi's press conference For me, it's it's really hard to overestimate how bad The ECB's timing has been in relation to the end of excessive purchase program at the end of last year Since a confirmation of that decision in December the outlook for European growth has slowed quite Significantly with both Germany and Italy likely to be in technical recession as of the end of last year now The ECB and Mario Draghi has insisted that it remains credible to maintain The pretense that we could see rates rise by the end of the summer and it's my it's my definition Pretence because it is a pretence you know many have construed that Rates will rise at the end of this year and certainly German ECB member Sabine and Louten Schlager has reiterated that earlier this week, but In reality, I think the ECB is going to have to acknowledge that the economic picture has darkened quite significantly And it will have to change its guidance accordingly and for me. I think the big question will be will Will it talk about further stimulus measures in the forms of loan packages TLTRO's LTRO's will it revise down its growth forecasts and its inflation forecasts because certainly I think if you look at the numbers It's hardly credible if it doesn't do that and if it does do that then it really has to push back any rate hike expectations back into 2020 if that happens, I would expect the euro to continue to decline back towards the lows that we saw in November even more so if Germany and France flash PMI's for January which come out the same morning remain very very weak which seems likely given the fact that Emmanuel Macron in France continues to have problems with the yellow vest protesters We also have UK unemployment in UK wages likely to see the wage gap The wage gap remain positive to CPI CPI fell to a two-year low earlier this week of 2.1 percent wages currently around about 3.2 percent So certainly a very positive number very positive picture coming out there Obviously Brexit concerns withstand not withstanding they are affecting consumer confidence But ultimately what we can do to what we can assume from the numbers that we've been seeing coming out of the UK is That we're getting much more of a positive wage gap when it comes to wages over inflation We've also got further earnings announcements coming out from Microsoft Q2 numbers on the 24th And we also have Ford motor companies Q4 numbers on the 23rd And those will be particularly interesting given the fact that Ford has announced Significant job losses in Europe as it tries to basically cut the losses that it's been making in its European operation For quite some time. So that's it for this week Thank you very much for listening if you do have any questions on anything that I've covered in this particular video Please feel free to Tweet me on m. Houston underscore CMC. Otherwise, thanks very much for listening. It's Michael Houston talking to you from CMC markets