The ECB and the UK General Election will dominate the focus for traders in the coming days and have the potential to significantly increase volatility for financial markets. We look at how these will impact on markets, the outlook for forex, equity indices and commodities in the coming week and potential moves that traders can expect as a result.

1. Weekly Outlook
Monday 5th June 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.
WHEN: Thursday 8th June, 1245BST
LAST: 0.0% main, -0.4% deposit
FORECAST: 0.0% main, -0.4% deposit
Impact: This could be a momentous ECB meeting.
According to Reuters, ECB sources suggest that the
Governing Council will acknowledge better growth (with
the PMIs also remaining strong) and will subsequently
dial back on the easing bias in the language of the
forward guidance. The ECB appears ready to drop a
long standing reference to downside risks, instead
referring to risks as “largely balanced”. This would mark
the first step towards normalisation of monetary policy.
The euro has been strong and is likely to gain ground
further if this is seen. Expect Bund yields to jump too.
Key Economic Events
Date Time Country Indicator Consensus Last
Mon 6th Jun 15:00 US ISM Non-Manufacturing PMI 57.0 57.2
Mon 6th Jun 15:00 US Factory Orders (MoM) -0.2% +0.5%
Tue 7th Jun 05:30 Australia RBA monetary policy 1.50% 1.50%
Tue 7th Jun 15:00 US JOLTS jobs openings 5.74
Wed 8th Jun 15:30 US EIA Crude oil inventories -6.4m
Thu 9th Jun 02:30 China Trade Balance (Exports / Imports) +7.0% / +8.5% +8.0% / +11.9%
Thu 9th Jun ALL UK Parliamentary Elections (key impact on 10th Jun)
Thu 9th Jun 12:45 Eurozone ECB monetary policy (main refi / deposit) 0.0% / -0.4% 0.0% / -0.4%
Fri 10th Jun 02:30 China Inflation (CPI & PPI) +1.5% / +5.7% +1.2% / +6.4%
Fri 10th Jun 09:30 UK Industrial Production (MoM) +0.7% -0.5%
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1N.B. Please note all times are British Summer Time BST (GMT+1), data source Reuters
Macro Commentary
In the next couple of weeks there could be some significant volatility increasing in the major markets. In the next
two weeks there is a General Election in the UK in addition to two crucial central bank monetary policy
announcements from the ECB and then the Federal Reserve next week. For this coming week, first up is the ECB
on Thursday. Economic trends have been improving in the Eurozone for several months now and although inflation
has been fluctuating, the PMIs suggest continued economic recovery. Expectation is that the ECB will reflect this
improvement in the forward guidance for the meeting this week and this could involve the removal of just two words
“or lower” but this would signal a removal of its commitment to extend easing measures on a deterioration. This
would signal to the market that normalisation has begun. It would also leave the door open to announcing the next
step, the start of tapering asset purchases at the September meeting with a view for the tapering say $20bn per
month at the beginning of January. The euro will be volatile. Also on Thursday the UK holds its parliamentary
elections. There will be an exit poll at 2200BST that night and the volatility will begin on sterling. The moves will
continue throughout Friday on the announcement of individual constituencies that are considered bellwethers. If
the result is any sort of surprise there will be a significant reaction on both sterling and FTSE 100.
Must Watch for: ECB monetary policy
German 2 year Shatz yield
The start of normalisation is likely to signal an upturn for the yield
of the German 2 year Shatz

2. Weekly Outlook
Monday 5th June by Richard Perry, Market Analyst
Foreign Exchange
Forex volatility will be elevated with some crucial factors impacting the key major currencies. The dollar is likely
to remain under pressure following Friday’s disappointing Non-farm Payrolls report with the continuing run of
light US data that would impact on Fed monetary policy going forward. The key focus for euro traders will be the
ECB meeting on Thursday. The euro has been rallying recently as economic data has picked up, in anticipation
of the ECB making the first move towards normalisation. These could be tentative steps but still significant.
However there is a risk that the immediate impact could be euro negative as markets have priced in this move.
This could lead to a dip on the euro possibly back to the technical support band $1.1020/$1.1100 on EUR/USD
that would give a chance to buy for medium term upside towards the base pattern target at $1.1350 in due
course. The outlook for sterling is a lot more difficult to call. The London terror attack has had little impact but on
Thursday night at 2200BST, exit polls will give the first indication of the next UK government which will increase
volatility throughout the Thursday night and Friday. A mild increase in Tory majority is likely and would be
relatively market neutral with a GBP/USD range of $1.2600/$1.3000. A strong increase in majority would be the
most sterling positive, driving GBP/USD above $1.3000 and possibly towards $1.3350/$1.3500 if the majority
approaches 100 seats. A hung parliament would be negative and weaken sterling towards $1.2000/$1.2500.
WATCH FOR: ECB monetary policy and the UK election will be crucial. The RBA will impact the Aussie.
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FX Outlook
GBP/USD
Watch for: The UK election will be a key driver
of direction
Outlook: Sterling continues to hold on to the key
long term breakout at $1.2775 and this remains
a key gauge for sentiment moving into the week
of the election. The final few polls may drive near
term volatility but trader may be reluctant to take
a view considering the polling uncertainties.
Direction will be generated from the election
result. Technically the market looks to be
rangebound between $1.2775/$1.3050 but a
downside break of the support would form a top
pattern that would imply 275 pips of downside to
$1.2500. This could be seen on any result that is
not an increase in majority for the Tories.
Momentum is now more neutrally configured and
the market seems to be factoring in little real
change as the election result.
EUR/USD
Watch for: The euro is breaking higher ahead of
the ECB meeting
Outlook: The bulls remain in control and
corrections remain a chance to buy. The old long
term pivot level at $1.1100 has been bolstered
as a basis of support by last week’s low at
$1.1108 but the subsequent gains in the wake of
the Non-farm Payrolls disappointment have
driven a breakout to a new high dating back to
9th November. The medium to longer term base
pattern continues to target $1.1350 and this
could easily be seen if the ECB makes a
decisive first move towards normalisation.
Momentum is strongly configured for further
upside.

3. Weekly Outlook
Monday 5th June by Richard Perry, Market Analyst
Equity Markets
A wave of positivity has swept global equity markets to new high ground in the past week. Until recently
markets have been broadly stuck in sideways consolidation ranges. The DAX, CAC and the Dow Jones
Industrial Average have all been stuck rangebound, however a pick up in US data allowed Wall Street to burst
higher late last week and other markets have followed suit b seemingly breaking the shackles. However the
disappointing payrolls report on Friday hit market sentiment and could now be a millstone for the bulls once
more. With little real reaction following the London terror attacks, for the FTSE 100 the focus will be on the UK
General Election that is taking place on Thursday. Will the polling booths open, Thursday could be fairly quiet,
however the real action will be seen on Friday. With a strong indication already known from the results coming
in overnight, the market is likely to gap at the open on Friday. The correlation between FTSE 100 and sterling
has been an interesting trade over recent months and it has been intriguing that the correlation had been
positive during the early weeks of the campaign. This is because an increased Conservative majority would be
seen as sterling positive (growth positive and less uncertainty over Brexit). However as the Tory campaign has
faltered and Theresa May’s “strong and stable” mantra has been increasingly questionable, the correlation as
turned more negative again, but is likely to be short-lived. My expectation of a mild increase in the Tory majority
would be a relatively neutral for FTSE 100, but a hung parliament would drag the index back to 7100/7255. A
strong increase in majority would help sustain the all time highs.
WATCH FOR: ECB meeting impacting on DAX and CAC, with FTSE 100 volatile on UK General Election.
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DAX Xetra
Watch for: With support holding the bulls appear
to be back in control
Outlook: Corrections on the DAX continue to be
bought into, and the rally on Friday just shows
that this remains the strategy. A period of
consolidation held on to the key breakout
support band 12,375/12,486 and the bulls have
now looked to breakout once more. Can the
market sustain the positive momentum into this
week? If the momentum indicators are anything
to go by, the outlook remains positive with the
Stochastics giving a buy signal and the RSI
rising in the high 60s. The ECB monetary policy
will drive volatility later in the week.
FTSE 100
Watch for: The move into all time high ground is
stuttering ahead of the election
Outlook: As rival markets have consolidate, the
FTSE 100 has been a key outperformer in recent
weeks. This has pulled the market well into new
high ground, however in front of the election
there could be a near term stalling in the run
higher. Momentum indicators are just beginning
to lose their way a touch even though they
remain positively configured. A six week uptrend
is being pressured as the bulls just begin to
stutter. Last week’s low at 7497 is the initial
support, whilst there is a support band
7400/7450 that the bulls will be keen to hold on
to now. The UK election will likely cause some
significant volatility though.
Index Outlook

4. Weekly Outlook
Monday 5th June by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
As the dollar has remained under pressure, gold has been supported. However even though the gold price has
been tracking higher, it is as though it has been a rally with the hand brake on. There has been an air of
generally positive market sentiment currently which has held the bulls back. Although gold pushed higher in the
wake of the disappointing Non-farm Payrolls and there is a feeling that there could be some further gains now
towards $1295, the medium term upside potential is becoming limited. The Dollar Index is now close to the 96
key pivot and this could begin to limit the gains. Oil completed a key breakdown last week with WTI below $48
and Brent back below $50 supports. Concerns over the efficacy of OPEC production cuts with Libya increasing
output, but also US production now Trump has withdrawn from the Paris Climate Agreement have weighed on
sentiment.
A flattening of the US yield curve remains an issue. The 2 year yield has been relatively stable recently
(although showed signs weakness in the wake of the disappointing payrolls). However it has been the decline in
the 10 year yield that has been such an eye opener. Atlanta Fed GDP Nowcast may continue to call for 4.0%
GDP in Q2, however, as the US economic data has deteriorated, the 10 year yield has dropped back from
2.300% to retest the low at 2.165%. A breach would suggest a further reversal of the reflation trade.
WATCH FOR: ECB meeting to impact commodities sentiment. ISM Non-Manufacturing will also be key.
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4
Gold
Watch for: Breaking out again has opened a run
towards the April high
Outlook: The upside rally on gold found a new
lease of life with the Non-farm Payrolls
disappointment. Holding the breakout above
$1261 the way is now open for a move back
towards the $1295 April high. Momentum
indicators are positively configured and the
outlook remains positive to buy into weakness.
The RSI has been sluggish but pushed into the
low 60s on Friday and the rallies have tended to
push towards 70. The pivot at $1261 is now a
basis of support for the bull run remaining on
track.
Markets Outlook
Brent Crude oil
Watch for: Near term head and shoulders top
implies $47.45
Outlook: The bearish outlook is gathering pace
now the support at $51 has been decisively
breached. This completed a head and shoulders
top pattern which implies $3.65 of additional
downside towards $47.45. The subsequent loss
of the historic support at $50 simply confirms the
negative near to medium term outlook now.
Rallies are a chance to sell, meaning a pullback
into $51/$51.45 will be eyed as an opportunity.
The key May low at $46.65 will now be eyed as
the sellers look to be in control. It would need a
rally back above the right hand shoulder
resistance at $52.60 to abort the corrective
outlook.

5. Weekly Outlook
Monday 5th June by Richard Perry, Market Analyst
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only invest in FX, Bullion and/or CFD trading with funds you are prepared to lose entirely. Therefore, only your excess
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