The Brexit can has been kicked down the road for a couple of weeks at least, but we are not out of the woods yet. We look at the latest developments and the impact on markets. The increased market fear over an inverted US yield curve is impacting on the outlook for forex, equities and commodities. 

1. Weekly Outlook
Monday 25th March 2019 by Richard Perry, Market Analyst
Forex and CFDs are high risk leveraged products that can result in losses greater than your initial deposit and you should
therefore only speculate with money you can afford to lose. FX and CFD trading are not suitable for everyone. Please
ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
transactions. You should first carefully consider your investment objectives, level of experience, and risk appetite and only
invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report.
Key Economic Events
WHEN: Friday 29th March, 1230GMT
LAST: +1.9%
FORECAST: +1.9%
Impact: In the Fed’s economic projections last week, they
suggested that core PCE would be stable for the next few
years around the 2% target. However having hit 2.0% on
several occasions in 2018, the Fed’s preferred inflation
measure is at risk of tracking lower once more. Inflation
has been more subdued in recent months however, a
forecast have been hovering at flat to lower in January
comes at a time where expectations for future inflation
have been trending higher in the past couple of months.
So reaction on bond markets will be interesting. The
dollar will also be reactive to a negative surprise.
Date Time Country Indicator Consensus Last
Tue 26th Mar 1230GMT US Building Permits / Housing Starts 1.30m / 1.22m 1.35m / 1.23m
Tue 26th Mar 1400GMT US CB Consumer Confidence 132.0 131.4
Wed 27th Mar 0100GMT New Zealand RBNZ monetary policy 1.75% 1.75%
Wed 27th Mar 1230GMT US Current Account -$130.0bn -$125.0bn
Thu 28th Mar 1000GMT Eurozone Economic Sentiment 105.9 106.1
Thu 28th Mar 1230GMT US GDP (final) +2.4% +2.6%
Fri 29th Mar 0930GMT UK Current Account -£23.0bn -£26.5bn
Fri 29th Mar 1230GMT US Core PCE +1.9% +1.9%
Fri 29th Mar 1400GMT US New Home Sales 625,000 607,000
Fri 29th Mar 1400GMT US University of Michigan Sentiment (revised) 97.8 97.8
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1N.B. Please note all times are Greenwich Mean Time (GMT), also US has made Daylight Saving Time Shift
Macro Commentary
A Brexit cliff edge has been averted, at least for now. The EU-27 granted an extension to Article 50 to kick the can
down the road. With the EU returning the ball back into the UK’s court, with interest, Parliament has to now decide
on the outcome. Firstly, it could accept Theresa May’s much maligned deal and exit the EU after a short technical
extension to 22nd May. But if Mrs May’s deal fails in Parliament again then the legislative takes control of the
process and has until 12th April to agree on an alternative deal prospect, which would require a much longer
extension for negotiation (and/or second referendum, general election etc), leave with no deal, or revoke Article 50.
Sterling has found support on the extension, but with all potential scenarios still on the table, upside has been
limited. The problem is that Parliament has to now decide on what it does want, and not just what it does not. This
process could move quickly this week as today the Parliament has the opportunity to take control through
amendments to motions by laying out a series of indicative votes (reportedly seven options) on alternative
proposals (such as an EEA style “Norway plus”, or customs union). Which indicative votes are chosen and their
order could be crucial. In granting this extension, Mrs May’s deal also looks highly unlikely to pass if it were to be
allowed a third “meaningful vote”. Whilst a no deal outcome is still possible, the likelihood is that Parliament will
coalesce around some form of softer Brexit. With sterling above $1.3000 this is certainly what the market still thinks.
Must Watch for: US Core Personal Consumption Expenditure
US inflation numbers
US inflation is falling and in an environment where wage growth is
still rising, this is a positive for the US consumer. Core PCE is
expected to drop back to 1.8%.

2. Weekly Outlook
Monday 25th March 2019 by Richard Perry, Market Analyst
Foreign Exchange
The significantly dovish shift from the Fed last week will have a significant impact on the dollar in the coming
months. The yield curve continues to flatten and this is dollar negative. Last week, the gap between 3 month
and 10 year Treasury yields went negative (considered by some as a curve inversion). Whilst the economic
slowdown of the Eurozone played a key role in not driving a weaker dollar into the weekend, if Treasury yields
continue to fall, the dollar will really struggle for sustainable traction. With concerns over global growth and
central banks across the board shifting dovish, the yen is a big winner in this game. The yield differentials are
playing into yen outperformance against the euro and the dollar (USD/JPY closing below 110 was an important
indication). The more that traders move back into bonds on global slowdown fears, the more that the yen will
benefit. The euro has been hit hard following Friday’s extremely disappointing flash PMIs which show especially
in Germany there is a problem with new orders amidst worries on trade, potential tariffs on automobiles and not
to mention Brexit uncertainty. The German Bund yield moving into negative territory seemed to be a real signal
for selling concerns to be exacerbated. Finally, looking at the Brexit extension, volatility on sterling options may
have been slightly capped, but it now all depends upon these indicative votes next week as to whether
Parliament can steer the UK towards a softer Brexit. Sterling seemed to like what it heard on Friday, but there is
likely to be more volatility around these votes in the coming days.
WATCH FOR: Yield differentials across the majors, Brexit indicative votes for GBP
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FX Outlook
GBP/USD
Watch for: Converging trendlines reflect a
market settling in for a Brexit resolution
Outlook: Cable has been in recovery mode
throughout 2019 leaving higher lows and higher
highs as a series of near term corrections find
buyers at higher levels. The market seems to
build support above $1.3000 in recent weeks
and this is something of a line in the sand in the
expectation of the outlook for a softer form of
Brexit. There is clear resistance in the
$1.3300/$1.3380 which has been seen in recent
weeks as a limiting factor in expectations for the
market. With the two week extension to Article
50 on Brexit could it be that the market now
begins to sit between $1.3000/$1.3300?
Momentum indicators increasingly benign
suggest this could be the case.
EUR/USD
Watch for: Closing below the $1.1300 old
support renews the bearish outlook
Outlook: The sharp deterioration in EUR/USD
into the weekend has flipped what had been a
strong looing recovery into a renewed trend
lower. Momentum indicators are all posting sell
signals at levels where they had previously fallen
over during the trend, with the RSI failing at 60
and a bear cross on Stochastics. If the market
now closes consistently under $1.1300 this week
it would be bearish for a retreat to test the
$1.1175/$1.1215 support band. Resistance at
$1.1420/$1.1450 is growing increasingly strong
now.

3. Weekly Outlook
Monday 25th March 2019 by Richard Perry, Market Analyst
Equity Markets
A Wall Street rally has gone c. 20% since the December lows. However, there are now question marks over the
longevity of this recovery. Indicators of a continued global cyclical slowdown deteriorated further on Friday and
acted as a significant drag on bond yields. The 10 year Treasury yield has fallen c. 35 basis points in Q1 at a
time where equities have continued to climb. Can bond prices and equities continue to climb concurrently?
Central banks have been far more dovish in recent months. However, the surprisingly dovish shift from the Fed
is a capitulation on tightening and borders on panic. The US yield curve is inverted across much of the curve and
moves such as this have tended to be the harbinger of US recession around 18 months out (the 3 month to 10s
spread went negative for the first time since 2007 on Friday). Whilst this is not an immediate bearish trigger for
equities, the omens are not good. There is still a key breakout support range on the S&P 500 between
2800/2817 which needs to be watched, whilst the key higher low for the outlook changing move on such a strong
market comes in at 2713. The German 10 year Bund yield falling below zero is a 29 month low and this move
into such a safe haven play such as the Bund does not bode well for continued DAX gains. The recovery on the
DAX is now under real threat and the breakout support band 11,370/11,415 will be seen as key this week. A
move towards a softer Brexit was helping to build underlying support on FTSE 100, but with a sharp move lower
on Friday coming amid a big decline on the 10 year Gilt yield, could this be a chance to buy?
WATCH FOR: Latest Brexit developments, Bond yield moves
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DAX Xetra
Watch for: A consistent trade below
11,370/11,415 triggers continued deterioration.
Outlook: The bulls are under pressure as a
massive bearish engulfing candle has broken a
three month uptrend. If the market begins to
trade consistently below the 11,370 breakout
support this would be an increasingly corrective
look to the chart. This comes with the
momentum signals falling sharply now, but
needs the RSI below 40 and MACD lines below
neutral in order for there to be confirmation of a
breakdown of the bull run. The rising 55 day
moving average will be a gauge this week as it
has previously been a basis of key resistance
during the H2 2018 sell-off, whilst becoming a
basis of support in the recovery.
FTSE 100
Watch for: Does a sharp correction give the
next chance to buy?
Outlook: A sharp move lower on Friday has
seen a deterioration in near term sentiment but
will it continue this week? FTSE 100 retreated
back to the support band between 7040/7200
and this will become a key gauge of sentiment in
the coming week. For now, this is still just a
retreat within an uptrend channel and as long as
support can begin to form the bulls will be eying
this as a potential opportunity to buy now. The
bullish outlook would be seriously questioned if a
three month uptrend at 7100 were to be broken,
but for a decisive shift in outlook, the key support
at 7041 needs to be broken.
Index Outlook

4. Weekly Outlook
Monday 25th March 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
A massive dovish shift from the Fed sets the tone for a weaker dollar and this bodes well for gold. Coming at a
time where other major central banks have gone decidedly dovish due to the continued global economic
slowdown will be gold supportive. Add in Brexit uncertainties and this should help to pull underlying support on
the yellow metal. Holding the long term pivot band $1300/$1310 as support maintains a medium term bullish
outlook and a move above $1320 could be key near term.
Amidst a global economic slowdown, the demand side of the oil equation had a significant jolt on Friday.
Negative economic signals from Bund yields and the 3 month/10year spread on Treasuries turning negative
was a signal to take profits. The near term implications need to be watch of this, but there is still expectation
that corrections on oil are a chance to buy.
Bond markets have been giving off some alarming signals in recent days. Treasury yields falling sharply on the
dovish Fed whilst a flattening continues to develop across much of the US yield curve. Concerns over a US
recession are rising. In the Eurozone, the German Bund yield has gone negative for the first time since October
2016, whilst at -0.09% the Japanese 10 year JGB is also at its lowest since the Bank of Japan began its yield
curve control.
WATCH FOR: Sentiment driven on Brexit indicative votes. Retracements on bond moves?
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4
Gold
Watch for: The long term pivot band between
$1300/$1310 is becoming a basis of support
again.
Outlook: A two week uptrend took the gold price
back above the long term pivot band between
$1300/$1310 as the recovery has progressed.
Momentum indicators are improving well now,
with the MACD bull cross and Stochastics
running towards strong bull territory. The higher
low at $1292.50 is a key level to watch but the
bulls will be disappointed if they now lose the
support of the bottom of the band at $1300 now.
Closing consistently above $1310 opens the way
for a move towards $1327/$1333 this week.
Markets Outlook
Brent Crude oil
Watch for: Corrections within the uptrend
channel remain a chance to buy
Outlook: The uptrend from the December low
may well have been broken long ago, but there
has been a shallow uptrend channel in place for
much of this year. The rising 21 day moving
average has been a good gauge of support
during this channel higher and corrections
remain a chance to buy. A couple of negative
sessions closed out the week on a sour note, but
this is still an unwinding move within the channel
higher. What is interesting though is that once
more the key Fibonacci retracements of the
$86.75/$49.95 bear run are playing a key role. In
turning back from 50% Fib at $68.35 the retreat
to 38.2% Fib is open at $64.00. The concern is
that this would breach the channel.

5. Weekly Outlook
Monday 25th March 2019 by Richard Perry, Market Analyst
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5
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