With Brexit being kicked into the long grass we look at the implications for sterling. What are the key factors to consider when looking at forex, equities and commodities this week? The flash PMIs are key on the economic calendar in the coming days.

1. Weekly Outlook
Monday 15th 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: Thursday 18th April, 0900BST
LAST: Manu 47.5 / Serv 53.3 / Comp 51.6
FORECAST: Manu 47.9 / Serv 53.3 / Comp 51.8
Impact: What happens in Asia (a source of much of much
of global growth) spills into the Eurozone. Asian PMIs
have ticked higher and Chinese data has started to take
account of monetary and fiscal stimulus measures. This
could begin to filter into Eurozone PMIs. Services and
Composite numbers showed signs of positive momentum
last month, whilst the new orders components of
manufacturing sectors showed that if Asian demand picks
up there could be an improvement this month. Given the
forward looking nature of the PMIs, expect volatility on
Bund yields and the euro.
Date Time Country Indicator Consensus Last
Tue 16th Apr 0930BST UK Unemployment / Average Weekly Earnings 3.9% / +3.5% 3.9% / +3.4%
Tue 16th Apr 1000BST Eurozone German ZEW Economic Sentiment +0.8 -3.6
Tue 16th Apr 1415BST US Industrial Production / Capacity Ulitization +0.3% / 79.1% -0.4% / 79.1%
Wed 17th Apr 0300BST China GDP (Q1) 6.3% 6.4%
Wed 17th Apr 0300BST China Industrial Production / Retail Sales/ FA Inv +5.8% / +8.3% / +6.3% +5.3% / +8.2% / +6.1%
Wed 17th Apr 0930BST UK CPI (headline / core) +2.0% / +1.9% +1.9% / +1.8%
Thu 18th Apr 0230BST Australia Unemployment (rate / claimant count) 5.0% / +12,000 4.9% / +4,600
Thu 18th Apr 0900BST Eurozone Flash PMIs (Manu / Serv / Comp) 47.9 / 53.2 / 51.8 47.5 / 53.3 / 51.6
Thu 18th Apr 0930BST UK Retail Sales (ex-fuel YoY) +4.0% +3.8%
Thu 18th Apr 1330BST US Retail Sales (ex-autos MoM) +0.4% -0.4%
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1N.B. Reuters data where possible. Please note all times are now British Summer Time (GMT+1)
Macro Commentary
Trying to deliver Brexit has made the UK something of an international embarrassment. For a second time, Theresa
May has been required to beg to the EU for an extension to the deadline for Article 50. The can has been kicked
down the road for perhaps as long as 6 months beyond the original 29th March deadline. Whilst this “flextension”
could be ended should an agreement be struck in the meantime, maybe this will bring some welcome respite for all
involved in UK politics (yes, I include myself in this one, as Brexit politics has been such a dominant part of our
thought process in analysing financial markets in recent months). Kicking Brexit into the long grass has allowed
volatility to reduce significantly on sterling options. Both one month and 3 month Cable implied volatility has
dropped sharply to levels not seen since January 2018 lows. However, for sterling, with the extension comes
prolonged uncertainty. The extension does little to help the economic malaise that has caused the drag on the UK
Services PMI (accounting for around 80% of the economy) into contraction territory below 50. The drag will also
mean that we can all but write off any lingering prospect of a Bank of England rate hike this year. Although UK real
wages look decent, around 1.5%, inflation is not a problem for the Bank of England and growth is sluggish. It will be
interesting to see how markets respond to wages, inflation and retail sales data this week. Short sterling interest
rate swaps do not price for a move from the Bank of England until well into 2020.
Must Watch for: Eurozone Flash PMIs
Eurozone PMIs
Have PMIs turned a corner? Services PMI have already picked up
and if Manufacturing also ticks higher then the outlook for the
Eurozone economy will improve.

2. Weekly Outlook
Monday 15th April 2019 by Richard Perry, Market Analyst
Foreign Exchange
For much of the time in recent months, we have been discussing the prospect of the US dollar rally falling over.
The premise being that the Fed rate hikes come to an end (tick) but also the US/China trade dispute coming to
an end (still likely). Through 2018 the dollar strength was on the back of tightening liquidity and safe haven
flows. We expect this to unwind as the trade dispute is resolved, trade flows resume and sentiment picks up.
This is taking time to come to fruition but we are still confident that it is in the interest of both the US and China
that there is an amicable conclusion. In the meantime, the dollar moves are very truncated. The Dollar Index is
seemingly on two week cycles of performance within a medium term range. The Fed may be on pause, but the
US economic performance remains solid, but the dollar continues to perform as a safe haven and yield
differentials are still a driver. As for the majors, it is interesting to see that Sterling and the Kiwi which had
previously been outperformers are beginning to slip back. The focus is increasingly turning to the euro and the
Aussie which are beginning to look far stronger. The ECB may have been bordering on the dovish, but Draghi
believes reduced inflation expectations are not anchored. A key factor in pulling inflation expectations higher
comes from the Asian PMIs which tend to be a lead indicator which is driving commodities prices higher. It
would seem that comments from the RBA’s Debelle suggest a less dovish than expected positioning which is
helping to pull the Aussie higher. In a week thankfully free of Brexit, focus can turn to the data again for sterling.
WATCH FOR: US Retail Sales for USD, UK wages, CPI and retail sales for GBP, China data for risk
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FX Outlook
GBP/USD
Watch for: Consolidation is coming to a head,
but which way will it break?
Outlook: A key floor has been forged with the
buyers consistently supportive around $1.3000
for the past two months. However, this also
comes with a run of lower highs and means that
$1.3200 is key resistance to watch this week. A
closing breakout of either level would drive
potential direction this week. Also as trendlines
converge, this week could be crucial. However,
the consolidation comes with momentum
indicators increasingly muted around a neutral
configuration and the lack of intent means the
breach of trendlines will come as the
consolidation continues. We do not anticipate a
trending move on Cable to be the result.
EUR/USD
Watch for: Momentum is positive for further
recovery this week, but can the bulls make a key
break?.
Outlook: The euro is once more pulling back
towards the top of the medium term downtrend
channel once more. This comes in at $1.1360
this week. Momentum indicators have swung
positively and set up the market for continued
recovery this week. However can the move last
to move beyond areas where previous rallies
have failed? The RSI has consistently failed
around 60 and MACD lines are struggling
around neutral this year. A closing breakout
above the channel would be positive, whilst the
key resistance is at $ .1450.

3. Weekly Outlook
Monday 15th April 2019 by Richard Perry, Market Analyst
Equity Markets
US earnings season is in focus. According to FactSet, consensus forecasts expect Q1 S&P 500 earnings will
decline by -4.3%. This shows a significant downward revision to earnings expectations at the turn of the year
which had been looking for growth of +2.8%. So, watching earnings surprises will be key, but also the forward
looking guidance for Q2 and beyond. Currently there is an expectation that Q1 will be something of a one-off,
with Q2 and Q3 earnings growth bouncing back strongly. However, will the outlook statements reflect this?
Equity markets have rebounded significantly in recent months as newsflow surrounding the US/China trade
negotiations has remained positive. Friday’s reports of agreement over currency manipulation gave another
boost on Friday. The fear will be that the good news is being priced in and it could be a “buy the rumour, sell the
fact” on the final agreement. If this comes at a time of lukewarm corporate earnings, then an S&P 500 trading on
around 17x forward earnings could struggle. What is also noticeable in the moves on European markets. The
DAX continues to fly in outperformance on positive newsflow surrounding China. With the DAX heavy dependent
on exports, the outlook for China and the global economy is intrinsically linked. Whereas, the negative correlation
between sterling and the FTSE 100 will create an added factor that UK equity traders need to consider. All this
given though, on an absolute basis, corrections continue to be seen as a chance to buy on European indices.
This would be up for review if there were to be a disappointing US earnings season.
WATCH FOR: Trade dispute newsflow across markets, US earnings, GBP impacting on FTSE
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3
DAX Xetra
Watch for: Building on the pivot band
11,725/11,865 which is supportive this week
Outlook: The breakout above 11,725/11,865
has been a key signal of a shift in the medium to
longer term outlook on DAX. Last week’s
consolidation unwound back to find support in
this band which is a long term pivot. The market
will now look to build support in this band which
is a medium term buy zone now. Any move that
unwinds to renew momentum should be seen as
an opportunity. The medium term momentum
configuration is positive with the RSI continually
above 40 and MACD lines above neutral. A
closing breakout above 12,030 re-opens the way
towards 12,460 in due course.
FTSE 100
Watch for: Any weakness into 7300/7370 will be
seen as a chance to buy.
Outlook: An uptrend channel contains a run of
higher lows and higher highs, suggesting that
near term corrections remain a chance to buy.
There is a basis of support around the latest
breakout 7370 as the breakout has hit a
consolidation amidst a slightly overstretch
position. However, there will be a buy zone
between 7300/7370 which will be seen as an
opportunity. Resistance sits at last week’s high
of 7477 which the bulls will be eyeing for a
breakout to open the September high of 7550 in
due course. The RSI holding consistently above
50 and MACD lines above neutral reflect the
strong configuration.
Index Outlook

4. Weekly Outlook
Monday 15th April 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Gold has really struggled in recent weeks. The bullish traction of the first six weeks of the year has fizzled out
now. In the past two months a run of lower highs and pressure on support has built up and this is negatively
impacting on momentum. Last week’s failure in the long term pivot band $1300/$1310 ramps up the pressure
which could weigh on key support at $1276/$1280 this week. Positive US data announcements are a negative
drag for gold, so watching the US Retail Sales will be key. Gold bulls will be looking for the perception of a
dollar negative impact that would come from resolving the US/China trade dispute to help support gold.
The IMF reduction in its outlook for global growth is a concern for oil demand in 2019. This means that focus
will be on Chinese GDP and manufacturing production this week. Any downside surprises will be a drag on oil.
The supply side is being helped by the news that Venezuelan production fell by 500,000 barrels in February,
whilst Libyan domestic unrest also reduces production. It was interesting to see news that OPEC would look at
increasing supplies again is Brent was around $80, so further upside potential could be seen.
Bond markets have broken sharply higher again after a period of consolidation. Flagging higher, the US 10
year yield will look to breakout above 2.55% which would then target 2.66%. The 10 year Bund yield breaking
above 0.05% implies 0.08%, whilst the 10 year Gilt yield implies 1.27%. Yield differentials are key for forex.
WATCH FOR: Developments in the US/China trade negotiations still key for sentiment
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4
Gold
Watch for: Increasingly negative configuration
on momentum indicators could pressure $1276
Outlook: A far less certain outlook has
developed on gold in recent weeks. Where the
market was previously running a trend of higher
lows and higher highs, this is no longer the case
as a couple of lower highs at $1324 and now
$1310 have been formed. The importance of
$1310 as a lower high should not be lost , being
the top of long term pivot band $1300/$1310.
Coming with momentum indicators posting a
range of near term sell signals that now strain
the medium term configuration will add to
concern of pressure on the crucial $1276/$1280
neckline this week. A potential head and
shoulders top still threatens.
Markets Outlook
Brent Crude oil
Watch for: Corrections within the uptrend
channel remain a chance to buy
Outlook: The rally on Brent Crude remains on
course, continuing to climb higher within the
uptrend channel of the past three months.
Momentum indicators are strongly configured,
with the RSI in the high 60s and little real
suggestion of any decisive change of sentiment.
Subsequently, the bulls will be eyeing the 61.8%
Fibonacci retracement of $86.75/$49.95 at
$72.70 as the next potential consolidation area.
The Fib levels have consistently been used as a
point where the market takes a pause for breath
in recent months. Corrections remain a chance
to buy and the $70.30 old key low was seen as a
floor throughout last week, but the 50% Fib at
$68.35 is the first real support.

5. Weekly Outlook
Monday 15th April 2019 by Richard Perry, Market Analyst
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5
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