Economic data for the US is key to how bond yields respond and how this impacts across major markets. The first week of the month is always jam packed with tier one data and this one could be key for the dollar. We look at the impact on forex, equities and commodities. 

1. Weekly Outlook
Monday 1st April 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 5th April, 1330BST
LAST: NFP +20,000; Av Earnings +3.4%
FORECAST: NFP +175,000; Av Earnings +3.4%
Impact: Although turning significantly dovish, the Fed is
also data dependent. With so much attention on the yield
curve inversion and relative US economic data
outperformance, there will be added focus on the key
data points. Payrolls was a massive miss last month, but
this is mitigated by the US Government shutdown
distortions and also similar disappointments in Q1 206
and 2017 were followed by strong bounce backs in the
next month. Focus also on wage growth remaining strong.
US yields will be very reactive but also USD major pairs
and gold.
Date Time Country Indicator Consensus Last
Mon 1st Apr 1330BST US Retail Sales (core, ex-autos, MoM) +0.4% ++0.9%
Mon 1st Apr 1500BST US ISM Manufacturing 54.2 54.2
Tue 2nd Apr 0430BST Australia RBA monetary policy +1.50% +1.50%
Tue 2nd Apr 1330BST US Durable Goods Orders (core, ex-trans, MoM) +0.2% -0.1%
Wed 3rd Apr 0145BST China Caixin Services PMI 52.3 51.1
Wed 3rd Apr 0900BST Eurozone Final PMIs (Composite) 51.3 51.9
Wed 3rd Apr 0930BST UK Services PMI 50.9 51.3
Wed 3rd Apr 1500BST US ISM Non-Manufacturing PMI 58.0 59.7
Thu 4th Apr 1230BST Eurozone Monetary Policy Meeting Accounts
Fri 5th Apr 1330BST US Non-farm Payrolls / Average Hourly Earnings 170,000 / +3.4% 20,000 / +3.4%
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1N.B. Please note all times are now British Summer Time (GMT+1)
Macro Commentary
Last week the US yield curve inverted at a point that will make the Federal Reserve sit up and take notice. The
spread between 3 month and 10 year Treasury yields inverted to -7 basis points. Whilst returning to non-inversion,
this is a warning sign, suggesting either short term rates are too restrictive and/or future growth expectations are
turning negative. Fed funds futures price c. 60% probability of a rate cut by December. Fed research of spreads
across the yield curve see the 3m/10yr spread as most accurate in forecasting recessions, calling the past 7
recessions (average time from inversion to recession c. 18 months). This sounds negative for the US economy and
should be dollar negative, but despite last week’s curve inversion, the dollar has been strong. There is a big debate
over whether “this time is different”. The degree that an expansion of the Fed’s balance sheet to $4.5tr has distorted
the curve could be significant, estimated to have depressed the longer end of the curve by between 100 to 150
basis points (suggesting the 10yr should be closer to 3.5%). How much this distortion would be realised with the
balance sheet normalisation ending in September this year, is also questionable. The other fact is that traders see
the US economy outperforming, especially the Eurozone. The key is to look at key business indicators, such as this
week’s PMIs, and confidence both of which have been falling, but are still robust. The dollar is still seen as being at
the safer end of the spectrum and if US data disappoints this could drive another deterioration in risk appetite.
Must Watch for: US Employment Situation – Nonfarm Payrolls & wage growth
US Non-farm Payrolls
The 12 month average is around 210,000 but with a tighening labor
market this is likely to reduce in the coming months.
Monthly US, Employment, Overall, SA, Absolute change, Nonfarm payroll, total 31/07/2011 - 31/07/2019 (UTC)
US Non-farm Payrolls
12 month m/a
Headline Non-Farm Payrolls
Auto
30,000
60,000
90,000
120,000
150,000
180,000
210,000
240,000
270,000
300,000
330,000
20,000.000
209,083.333
2012 2013 2014 2015 2016 2017 2018 2019
2010

2. Weekly Outlook
Monday 1st April 2019 by Richard Perry, Market Analyst
Foreign Exchange
UK Prime Minister May lost a vote on her Withdrawal Agreement fore a third time on Friday. This means that
the UK will now have a deadline of 12th April saying that the implications are “grave”. This means that there will
be an emergency summit (probably on 10th April) in order for the UK to beg for a much longer extension to
Article 50. Whilst President Macron of France could still throw a spanner in the works, the likelihood is that a
longer extension will be granted. But for what? A customs union could garner some support in Parliament,
which would be sterling positive (a softer Brexit). Sterling fell in the wake of May’s latest defeat, not on the
expectation of a customs union finding support, but perhaps now the likelihood of a general election. With a “no
deal” Brexit now all but ruled out, the only reason why sterling would fall now would be fear of a general election
which could bring in a Labour Government (seen as less business friendly, even more so than this horrific Tory
administration). Having been supported for weeks, Cable closing consistently below $1.3000 would be a signal.
It could be another interesting week ahead for forex, with a lot of focus on whether the dollar can sustain recent
strength and whether the euro will continue to slide. The PMIs could be crucial to this, whilst a drop away in
core Eurozone inflation will add to pressure on the euro. Positive US data surprises gave the dollar a boost
again last week, so this will increase the focus on Friday’s payrolls but also the average hourly earnings. If
yields take another dive again, the big winner is likely to be the Japanese yen.
WATCH FOR: PMIs and Eurozone inflation, Brexit indicative votes for GBP.
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FX Outlook
GBP/USD
Watch for: A move below $1.3000 on a closing
basis would be an outlook changer
Outlook: Cable is now around 5 weeks into a
range between $1.3000/$1.3300 as the Brexit
uncertainty has continued. The past week has
seen the outlook deteriorate as a three month
uptrend has been broken and intraday tests
below $1.3000 have been seen. However, for
now $1.3000 seems to be a trigger for the bulls
to support again. If this changes though it would
be a significant outlook changer and would open
$1.2800 as the next key medium term pivot
which is supportive. Momentum indicators
swinging lower suggest the pressure is growing
now as recent rallies have been failing at lower
levels. Resistance $1.3200/$1.3270.
EUR/USD
Watch for: Holding on to the $1.1175/$1.1215
hints at a potential rebound. Can it be trusted?
Outlook: Can the euro turn a corner again this
week? The market has picked up from the
support band $1175/$1215 at a point at which
medium term momentum indicators have often
found support. The key gauge for the medium
term outlook will again be around $1.1300 as a
rally failure would be once more under the
collection of falling moving averages. Previously
in the past few months, we have seen the euro
picking up again to swing higher over the next
week or two within what is now a downtrend
channel. However, there is still a trend of selling
into strength.

3. Weekly Outlook
Monday 1st April 2019 by Richard Perry, Market Analyst
Equity Markets
Looking at the impact of the Treasury yield curve inversion, Saxo Bank undertook analysis of the past ten
occasions where the 3 month/10n year spread went negative. Over the subsequent 18 months, the S&P 500 fell
in 7 of the 10 occasions, with an average decline of -7%. Whilst there is much debate on whether “this time is
different” with the curve distorted by quantitative easing, Saxo believes that this data is enough to lead to a more
cautious outlook for equities in the next 18 months. Looking a year and a half ahead places us right in the midst
of the 2020 Presidential race, where conventional wisdom would suggest that President Trump would surely be
looking to engineer a positive outlook on Wall Street. So given the suggestion that “this time it’s different” on the
curve inversion, this would suggest there is much to ponder in the outlook for equities in the coming months.
What was interesting last week was Thursday’s rally on news of progress in the US/China trade talks. Although
news on trade has been somewhat quiet in recent weeks, as investors have worried over the implications of a
big dovish shift from the Fed and a global economic slowdown, it is clear that newsflow on the trade talks is still
relevant for investors. A successful resolution is still being priced in by markets but it is still unlikely that an
unambiguous win/win with everyone getting what they want is going to happen. Positive risk is still a driver of
DAX outperformance in Europe, whilst the FTSE 100 is still seeing its performance impacted by a negative
correlation with sterling with Brexit still p in the air. A resolved Brexit should still be broadly FTSE positive.
WATCH FOR: Brexit newsflow, US/China trade newsflow
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3
DAX Xetra
Watch for: A swing higher is eying the key long
term pivot band 11,725/11,865 again.
Outlook: There has been another impressive
response by the bulls to a supposed breach of
key support. In early February the recovery
looked under pressure as the market broken
below 11,000 but an instant recovery from the
bulls swung the market back higher again. The
latest move below 11,370 (another key pivot
support) has also been bought into and the
market is accelerating towards 11,824 the March
high. This is a key resistance in the long term
pivot band 11,725/11,865 so this marks a crucial
moment for the outlook on a prospective
sustainable recovery.
FTSE 100
Watch for: A closing breakout above 7370
opens 7550
Outlook: A retreat into the support band
7040/7200 has given the bulls another
opportunity to swing back into control. A strong
run higher is leaving 7147 as another potential
higher low within what is now an uptrend
channel of the past few months. The bulls will be
eyeing the resistance of the past six months,
needing a close above 7370 to open the way
higher towards 7550. Within this, the corrections
continue to be seen as a chance to buy, with the
medium term momentum indicators being
positively configured. The RSI picking up again
from 50 to above 60 suggests strengthening
momentum into this week.
Index Outlook

4. Weekly Outlook
Monday 1st April 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Gold came under huge selling pressure last week amidst a US dollar rally coming at a time where Treasury
yields rebounded and risk appetite improved. This move took a significant downside shift in outlook but not yet
terminal to the rally. The support band $1276/$1280 is key to this outlook once more and will need to be
watched this week. If Treasury yields fall back again (and the US curve inversion reasserts) this should help to
provide some renewed support for gold. However, the dollar seems to be responding to positive data surprises
and gold therefore will be reactive to a packed economic calendar throughout this week.
Can oil continue its rally of the past few months? The question marks surrounding the US yield curve inversion
have stunted the oil rally as the demand side of the demand/supply equation has been given a less positive
outlook. Positive risk remains positive for oil and so the direction of US Treasury yields will be key.
Bond markets are having a profound impact across financial markets as traders continue to weigh up the
implications of the inversion of the US yield curve. The fact that it is coming at a time where the German 10
year Bund yield has gone decisively below zero meaning Eurozone core/periphery spreads are rising and that
the dollar has generated support. Other yields are also still under pressure, with the Australian 10 year at record
lows below 1.8%, UK 10 year Gilt yield below 1.0%.
WATCH FOR: PMIs and Non-farm Payrolls will be key. Brexit developments as ever.
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4
Gold
Watch for: The support between $1276/$1280
is now key
Outlook: A basis of support coming n on Friday
has, for now, averted the immediate pressure on
the key neckline support band $1276/$1280.
However, any slip away will mean that this
support takes on increasing importance. Once
more on the upside, traders will be seeing the
long term pivot between $1300/$1310 as a basis
of resistance and will be a limiting factor for
recoveries. With momentum indicators
negatively configured there is a feeling that the
bullish medium to longer term outlook is hanging
by a thread. Breaching $1276 would be the last
straw.
Markets Outlook
Brent Crude oil
Watch for: Corrections within the uptrend
channel remain a chance to buy
Outlook: Can oil finally make a breakout? It is a
question being asked repeatedly as the slow
grind higher over recent weeks continues.
Momentum indicators are positioned positively,
with the RSI bottoming in the mid-50s and
pushing into the 60s indicating that near term
corrective moves are a chance to buy. The
indicator to watch is the 21 day moving average
(currently $67.20) which has been an excellent
basis of support throughout 2019. A decisive
close above the 50% Fibonacci retracement at
$68.35 opens the next key resistance at $70.30
and the 61.8% Fib level at $72.70.

5. Weekly Outlook
Monday 1st April 2019 by Richard Perry, Market Analyst
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