The document provides a weekly economic and market outlook. It notes that key upcoming economic data this week includes US CPI inflation on Thursday, which will be closely watched given the Fed's focus on inflation. Recent global PMIs point to a slowing global economy. Central banks have adopted more dovish rhetoric and bond yields have fallen sharply. The document analyzes implications for currencies like the dollar and euro, as well as equities, commodities and bonds. US CPI will be important for determining the likelihood of an interest rate cut by the Fed in July.

1. Weekly Outlook
Monday 8th July 2019 by Richard Perry, Market Analyst
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ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
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Key Economic Events
WHEN: Thursday 11th July, 1330BST
LAST: Headline +1.8%, Core +2.0%
FORECAST: Headline +1.6%, Core +2.0%
Impact: The number of key tier one US data points in
front of the next FOMC meeting (announcement 31st July)
are running low and each one could prove to be pivotal.
Given the Fed’s key focus is on faltering inflation
expectations, this means that the CPI data, whilst not
being the Fed’s preferred inflation measure, will come
under scrutiny this week. CPI has been on a downward
trajectory if Core CPI drops below the key 2% level this
would be taken as a signal by the market that the Fed will
be cutting rates. US Treasuries and the dollar will be key
instruments to watch.
Date Time Country Indicator Consensus Last
Tue 9th Jul 1500BST US JOLTS jobs openings 7.51m 7.45m
Wed 10th Jul 0230BST China CPI / PPI +2.7% / +0.3% +2.7% / +0.6%
Wed 10th Jul 0930BST UK GDP (monthly – MM/YY) +0.3% / +1.3% -0.4% / +1.3%
Wed 10th Jul 1500BST Canada BoC monetary policy +1.75% +1.75%
Wed 10th Jul 1500BST US Fed chair Powell testifies (also Thu)
Thu 11th Jul 1230BST Eurozone ECB monetary policy accounts
Thu 11th Jul 1330BST US CPI (headline / core) +1.6% / +2.0% +1.8% / +2.0%
Thu 11th Jul 1330BST US Weekly Jobless Claims 222,000 221,000
Fri 12th Jul n/a China Trade Balance (Exports / Imports) +$45.2bn (-0.6% / -4.6%) +$41.7bn (+1.1% / -8.5%)
Fri 12th Jul 1330BST US PPI (headline / core) +1.6% / +2.2% +1.8% / +2.3%
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1N.B. Reuters data where possible. Please note all times are now British Summer Time (GMT+1)
Macro Commentary
Last week’s forward looking global PMIs continue paint a picture of a global slowdown taking hold. Major central
banks continue to come out with dovish rhetoric. Bond yields have fallen sharply as the US 10 year Treasury yield
has dropped below 2% and significantly the German 10 year Bund yield last week dropped to below the -0.40%
level of the ECB deposit rate. Markets are pricing in a huge renewed monetary easing from major central banks.
However, whilst the Atlanta Fed’s GDPNow projection has fallen to +1.3% annualised US GDP in Q2 (from +3.1%
in Q1), this reflects faltering growth but nothing too horrendous yet. This means the Fed has a decision to make in
July. In June, Fed Chair Powell said that he had “one overarching goal, to sustain economic expansion”. Fed Funds
futures are pricing in four rate cuts by the end of 2020, whilst the Fed’s dot plots have just one. US data does not
require a panic move. Is the Fed going on global economic trends, or domestic? Is the subdued nature of inflation
(holding around +1.6% on core PCE) warranting a new cut cycle? We have been saying for some time that the
market has gone too far in pricing for cuts. A July cut of 50 basis points would be seen as a panic move, whilst we
even question the wisdom behind a 25bps cut. The key question for traders is just how the strong jobs growth in
Friday’s payrolls report impacts on the Fed. If CPI inflation holds up well this week, perhaps we will begin to see
guidance for a less dovish position? The dollar is rallying off the payrolls report, this could be set to continue.
Must Watch for: US CPI
US Inflation
Wages are holding up relatively well, but with core PCE stuck
lower, focus will be on whether core CPI falters below 2% and 14
month lows.

2. Weekly Outlook
Monday 8th July 2019 by Richard Perry, Market Analyst
Foreign Exchange
Has the solid/strong payrolls report opened the gates for a dollar rally? Headline jobs growth averages 187,000
which is still pretty big considering the late cycle tightness of the labor market. Wages growth is holding above
3%. So why all the chat about imminent rate cuts? Holding the bounce on the US 10 year Treasury yield back
above 2% would be seen as a key near term move and could suggest the market has gone too far and is now
ready to retrace some of the decline. With several commentators calling for a 50 basis point cut in July,
suddenly perhaps 25bps may even not be seen. US CPI now becomes the next key gauge of this, but in front of
that, renewed dollar strength is set up. This would mean EUR/USD and Cable testing supports. The euro is
under pressure across major crosses. Eurozone manufacturing data is ringing alarm bells, and key indicators
out of Germany especially. German Ifo and ZEW sentiment continue to hit four year lows, whilst New Orders
suggest little hope of a turnaround on the horizon as the US/China trade dispute hits order books. Eurozone
services data has been reasonable, but retail sales data is deteriorating across the Eurozone and consumer
confidence is a big concern. With the prospect of a monetary policy dove (Christine Lagarde) replacing ECB’s
Draghi, renewed threat of US tariffs, the prospect of setting up for further monetary easing is significant. This
will weigh on the euro across major pairs. One key factor to weigh for sterling is of the next Prime Minister.
Boris Johnson remains hot favourite and will play fast and loose with “No Deal” threats, weighing on sterling.
WATCH FOR: US CPI inflation is key, also watch for ECB and Fed member rhetoric giving a steer
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FX Outlook
GBP/USD
Watch for: Huge pressure on the crucial support
band $1.2475/$1.2500.
Outlook: We continue to see negative pressure
on sterling (and subsequent underperformance
across the majors) which is a drag on Cable. The
key question this week is over the fate of the
crucial support band $1.2475/$1.2505.
Momentum indicators are medium term
negatively configured and near term rallies will
be a chance to sell. There is a resistance band
$1.2600/$1.2650 seen as key now as the
pressure increases on the key range floor. If
there is a close clear of $1.2475 it opens levels
not seen since early 2017, with minor support
$1.2350 before $1.2100. A move through
$1.2760 is still needed to improve sustainably.
EUR/USD
Watch for: A retreat towards a test of $1.1180 is
set to be a key move this week
Outlook: The euro is under pressure having
broken the five week recovery uptrend channel
and the old pivot at $1.1265. With momentum
indicators reflecting the deterioration, the euro
recovery has been extinguished and rallies are
now being seen as a chance to sell this week.
The question is now whether a neutral outlook
turns negative. The key support remains the
June higher low at $1.1180. For the past month
he market has been keeping the bears at bay,
but a breach of $1.1180 would suggest the
recovery phase is confirmed to be over. It would
then open a retest of the key April/May lows at
$1.1110.

3. Weekly Outlook
Monday 8th July 2019 by Richard Perry, Market Analyst
Equity Markets
Investors currently face a period where good news for the US economy is considered bad news for equities.
Anything that pushes back expectations of looser monetary policy by the Fed has a negative read through for
equity markets. The big bull market has been primarily borne out off ultra-loose monetary policy. Whilst the Fed’s
tightening cycle has restricted the upside, it is noticeable that the June rally which has followed into July and all-
time highs has come at a time where the market has been mulling over whether there will be a rate cutting cycle
to begin in July. Data that questions this move will lead to a correction and sluggish outlook for equities. This is
what we have seen in the wake of Friday’s payrolls report. Whilst a 50 basis point cut can surely now be put to
bed, there now has to be an uncertainty over whether a cut will happen. So this week the focus will be squarely
on the next tier one US data that can drive Fed expectations, the US CPI. If inflation holds up (core CPI above
2.0%) then this will add further uncertainty over a July cut and pull equities lower. The charts may hold a key
though. How the bulls react with the underlying demand around the old key breakouts will be important. For the
S&P 500 there is support between 2940/2964. Looking on the European markets, the DAX bulls will need to
defend support at 12,440, but an added feature is that a technical exhaustion signal is coming with the
momentum indicator, the RSI turning lower from 70. A similar outlook is forming on FTSE 100 too. There is
support in the band 7530/7550 but coming with near term profit-taking signals too on RSI and Stochastics.
WATCH FOR: US CPI is key for the outlook of the next FOMC move in July.
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3
DAX Xetra
Watch for: Near term corrective signals suggest
an unwind back towards the 14,440 breakout
support threatens
Outlook: The breakout above 12,440 opened
the next bull phase, however, there are signs of
slowing on momentum indicators which could
result in an unwinding move this week. A
Stochastics sell signal and RSI pulling back from
70 hints at near term exhaustion. However, this
is still within the scope of a bull market and
medium to longer term technicals remain
positive. How the market reacts to a corrective
pullback would be important, but at this stage it
would be a buying opportunity. Still way above
all moving averages, an unwind into support is a
chance to buy.
FTSE 100
Watch for: A prospective near term unwind is
increasingly possible this week.
Outlook: As the market broke out above the
April high at 7529, the outlook has become
increasingly positive. However, with momentum
indicators reaching stretched levels a near term
unwind is threatening this week. The RSI
crossing back below 70 and a Stochastics sell
signal are warnings shots for the bulls. However,
the market trades decisively above the moving
averages and there is room for an unwinding
move back into the support band 7470/7530
which will be viewed by the market as an area to
build the next higher low. Whilst support at
7315/7370 remains intact the medium term bulls
will be confident.
Index Outlook

4. Weekly Outlook
Monday 8th July 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Gold is a volatile play right now. The Average True Range on gold is at $24 which is a two and a half year high.
However, this volatility is coming as moves on gold remain highly negatively correlated to the dollar. A strong
dollar move in the wake of the payrolls report has seen gold driven lower. If US CPI does not pull lower this
week, then the market will need to re-assess its expectations of rate cuts from the Fed. This will weigh on gold
as a near term corrective move. However, we continue to view near term weakness as a chance for medium to
longer term buying. Technical signals have turned corrective and a breach of $1381 would open support around
$1350, which we would view as a strong buying opportunity.
OPEC agreed to extend its production cuts by another nine months (to March 2020) at last week’s bi-annual
meeting. Theoretically this would be seen as price supportive for oil, but the demand story is a much greater
pull on the price now. Fears of a global slowdown have weighed on oil since May. A market sceptical of how
long it will take the US/China dispute to be resolved will weigh on oil. Friday’s upside surprise on the payrolls
report helped to boost the oil price and could now provide a chance to buy within the downtrend.
Bond yields remain key for markets. However, is the US 10 year above 2% a key turning point? Also could the
10 year Bund yield hitting -0.40% (the ECB’s deposit rate) be seen a turning point?
WATCH FOR: US CPI inflation will be key for yields and the outlook for FOMC rate cuts.
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Gold
Watch for: Support at $1381 is key to prevent a
deeper correction
Outlook: A wild ride on gold continues and the
volatility remains elevated. Corrective signals are
growing, with the sell signal on the MACD lines
as RSI and Stochastics begin to both look a little
tired. $1439 is clearly a key area of resistance in
the making, but traders will be watching $1400
as a gauge on a near term basis. Holding on to
$1400 will prevent too much of a corrective
outlook from taking hold. Whilst $1381 support
the bulls will consider the slip may be enough to
be tempted again too. The medium to longer
term outlook looks towards pressuring the $1439
resistance and using near term corrections as a
chance to buy.,
Markets Outlook
Brent Crude oil
Watch for: The pivot around the 38.2%
Fibonacci retracement is a gauge this week
Outlook: The unwinding move since the April
high of $75.60 has at least looked to form a floor
of support around $60 in recent weeks. What is
not clear at this stage is whether the support is
sustainable. Momentum indicators play a part in
this, with the MACD lines stuck under neutral, it
suggests that rallies are still struggling. The run
of lower highs in the past couple of months
means that resistance at $66.85 is an important
gauge now in the coming week as a failure to
break back above it will increase the potential for
this to be the next key resistance. The near term
outlook is being run off a pivot around the 38.2%
Fibonacci retracement at $64.00.

5. Weekly Outlook
Monday 8th July 2019 by Richard Perry, Market Analyst
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5
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