The outcome of the trade negotiations between the US and China will continue to impact on market sentiment this week, but the tier one US data will also be in focus with Advance GDP and the Fed's preferred inflation measure along with the forward looking PMIs all key. We look at the impact on forex, equities and commodities.

1. Weekly Outlook
Monday 25th February 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 28th February, 1330GMT
LAST: 3.4% (final Q3)
FORECAST: 2.6%
Impact: Around a month overdue, (following the US
Government shutdown) we finally get a first official look at
how US growth performed in Q4 2018. This could be a
crucial number for markets as US data seems to be been
seen as holding up relatively well against slowing trends
of other major global economies (China and the Eurozone
especially). The devil could be in the interpretation.
Consensus forecast is +2.6%, but it is interesting to see
the Atlanta Fed’s GDPNow (tends to be a good gauge)
running at just +1.4%. Expect a surprise and a volatile
reaction on Treasuries and the dollar.
Date Time Country Indicator Consensus Last
Tue 26th Feb 1500GMT US CB Consumer Confidence 124.3 120.2
Tue 26th Feb 1500GMT US Fed chair Powell testifies to Senate
Wed 27th Feb 15000GMT US Factory Orders +1.5% -0.6%
Thu 28th Feb 0100GMT China PMIs (Manufacturing / Services) 49.5 / 49.5 54.5 / 54.7
Thu 28th Feb 1330GMT US GDP (Advance Q4 2018) +2.6% +3.4% (final Q3)
Fri 1st Mar 0145GMT China Caixin Manufacturing PMI 48.7 48.3
Fri 1st Mar 0930GMT UK Manufacturing PMI 52.0 52.8
Fri 1st Mar 1000GMT Eurozone CPI (flash Feb headline / core) +1.5% / +1.1% +1.4% / +1.1%
Fri 1st Mar 1330GMT US Core Personal Consumption Expenditure +1.9% +1.9%
Fri 1st Mar 1500GMT US ISM Manufacturing 56.2 56.6
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1N.B. Please note all times are British Summer Time (BST) i.e. GMT +1. Data: Reuters
Macro Commentary
Since April last year a trade dispute between world’s two largest economies has dogged the global economy. A
cyclical downturn may have already been hinting, but the Chinese economy is undoubtedly slowing down, whilst
growth in the Eurozone has stalled across several of the region’s major economies. However, the trade dispute
could be coming to an end as President Trump has extended a 1st March deadline for negotiations to avert a
significant escalation in tariffs. Avoiding a downward spiral into all out trade war could be crucial for the global
economy. If these talks breakdown and end acrimoniously (anything is possible with someone such as Donald
Trump involved) then the world will be on the path towards a significant economic slowdown that could plunge
many major western economies into recession. However, with Trump’s extension, equity markets are quickly
moving to price in the good news. This could give rise to buy on rumour in the coming weeks until the agreement is
signed which may then lead to sell on fact move, but that may only be a near term move. The economic benefits to
come from maintained supply lines and economic relationships restored will increase risk appetite. This would
reverse the track of lower yields, helping to attract investors to higher risk currencies again (such as the Aussie and
Kiwi), whilst the yen would be the ultimate underperformer. With yuan depreciation capped (seemingly part of the
negotiations), this would also drive dollar underperformance, whilst benefitting emerging market currencies.
Must Watch for: US Advance GDP (Q4 2018)
US 10 year Treasury bond yield
Yields seem to have stabilised their decline but upside is still hard
to comeby.

2. Weekly Outlook
Monday 25th February 2019 by Richard Perry, Market Analyst
Foreign Exchange
The dollar rebound has come on the perception of strong US relative economic performance, however, it is
interesting to see some improvement in Eurozone data with consumer confidence, German ZEW and Eurozone
flash PMIs better than expected (although Friday’s disappointing German Ifo tempers this encouragement
slightly). After a worrying end to 2018 (where Germany only just missed out on technical recession), and little
sign of a pick up in January, it seems that February is looking more promising. Much of the perception of US
outperformance has come at a time where US data has been limited by the Government shutdown. However,
this could all begin to change this week as the US data starts to filter through. A clutch of tier one data comes
with Consumer Confidence, Q4 GDP, core PCE and ISM Manufacturing. This will give far more detail over how
the US economy finished 2018, with growth and inflation in focus. Will the US actually be outperforming by that
much? There is likely to be dollar volatility especially with the GDP number, but also be on the look out for
further progress in the US/China trade story, with the supposed deadline on Friday. Yield differentials could be
a key factor again this week. If the global macro story is not falling out of bed, then the yen is not the place to
outperform. JGB yields are increasingly tracking lower with the 10 year yield below zero and risk appetite is
buoyed by news that the Fed is set to end its balance sheet reduction program. Coming amid signs of progress
in the US/China story which helps risk, XXX/JPY crosses should be underpinned for potential breakouts now.
WATCH FOR: US/China trade story, US data: Confidence, GDP, core PCE and ISM Manufacturing
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2
FX Outlook
GBP/USD
Watch for: Holding above $1.3000 maintains a
positive bias within the range.
Outlook: Cable has been trading in a sideways
range between $1.2475/$1.3300 since July 2018
and within the range there are a number of
supportive pivots between $1.2800/$1.3000,
whilst trading above the psychological $1.3000
maintains a positive configuration within the
range, and for that matter an assessment of
more positive outcome in the Brexit process.
Resistance at last week’s high of $1.3110
protects a move to the $1.3215 January high.
The momentum indicators are edging positively
configured but the lack of conviction (RSI stuck
between 40/60) also reflects the inability for the
bulls to maintain control.
EUR/USD
Watch for: With $1.1300 once more a key floor
a decisive breakout above $1.1350 reignites the
bulls again within the range.
Outlook: Hints of a recovery within the trading
range hit the buffers towards the end of last
week but the potential for further gains is still
there. Momentum indicators also reflect the false
start, but closes above $1.1350 will open the
mid-range pivot at $1.1420 once more. The lows
of the range came under pressure recently but
holding above $1.1300 is once more the base
case for the bulls. If the market starts to close
consistently below $1.1300 having seen the rally
fail last week this would really put the pressure
back on the $1.1213 the November low.

3. Weekly Outlook
Monday 25th February 2019 by Richard Perry, Market Analyst
Equity Markets
Equity markets seem to have steadied after their wobble around the turn of the year and are now busy in
recovery mode. The momentum of the move could be stronger, but the trend continues to post higher lows and
higher highs across major markets and track through old key highs. Within this move there has been a
fundamental shift that should help to generate continued gains this year. At the January FOMC meeting, the Fed
signaled a move to a more patient stance on monetary policy. However, the real trigger for equities came in the
FOMC minutes last week which said that its balance sheet normalisation (quantitative tightening) would end this
year. This seems to be the Fed being worried about the impact of its balance sheet reduction. Maintaining the
liquidity in the system is risk positive and equities positive. Quantitative tightening removes that one big buyer
(the Fed) from the Treasuries market and the net effect to push everyone back down scale of risk. However, if
the Fed steps back from QT earlier than expected will help to stoke the fire of risk appetite. The US/China trade
dispute has certainly got a part to play in this move too. The deadline for the negotiations is on 1st March, but
President Trump has suggested on recently that the deadline could be extended. This seems likely. A positive
resolution of the trade talks will be another positive for equities over the medium term. The S&P 500 is on course
to test the 2800/2816 key medium term resistance and a breakout would be a hugely strong signal for the rest of
2018. The DAX above 11,565 opens the 11,725/11,865 long term pivot, whilst FTSE 100 needs to breach 7300.
WATCH FOR: US/China trade negotiations progress, US Advance GDP
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3
DAX Xetra
Watch for: The 8 month downtrend is a key test
this week
Outlook: An The recovery above 11,370 was a
key move last week and really opens the upside
for the continued recovery. The implication of the
range breakout is around 400 ticks and means
that the long term pivot band 11,725/11,865 is
now a realistic recovery target. The key for this
week comes with the 8 month downtrend which
comes in at 11,525. With momentum indicators
swinging higher in bullish configuration there is a
strong configuration with further upside potential.
Weakness is a chance to buy, with the breakout
at 11,370 being supportive.
FTSE 100
Watch for: Corrections remain a chance to buy
with upside opening above 7300.
Outlook: The recovery on FTSE 100 has started
to stall in the last week. It is interesting to see
this coming around the resistance of the long
term pivot band between 7200/7300. The
momentum indicators are tailing off in this
recovery but remain strongly configured on a
medium term basis and for now weakness is still
seen as a chance to buy. This will be the case
unless the support of the higher reaction low at
7065. The bulls will be looking at the resistance
at 7260 but the real bull move would be a move
above 7300 which would confirm the bull move.
This would then open upside towards 7550.
Index Outlook

4. Weekly Outlook
Monday 25th February 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Gold broke out above $1326 last week and although there was a retracement there is a sense of a far more
positive outlook that is now in place. The Federal Reserve is no now patient in its tightening cycle which should
ultimately be dollar negative, gold positive this year. However, the path of upside may not be straight line as the
Fed remains positive on the US economy, and therefore strong US data could raise the prospects of perhaps
one more hike. However, this is caveated with the US/China trade dispute which if resolved would be dollar
negative and subsequently help to support gold again.
Oil continues to climb and this is clearly an encouragement for US shale oil suppliers with the rig count climbing
by the week and the EIA now saying that US supply is now up to 12 million barrels per day. Despite this, the
outlook for oil remains positive, with US sanctions on Venezuela hitting supplies, whilst the market is busy
pricing in a US/China trade agreement. Could this mean buy on rumour, sell on fact?
Bond yields have been tracking lower recently as a succession of negative data points have come through for
major economies. However, could this be about to change? Yields could find some uplift should positives come
out of the US/China trade negotiations. This would be risk positive and positive for global trade. It is interesting
to see that 10 year JGB yields have become stuck below zero, something that has yen implications.
WATCH FOR: US/China trade negotiations, US data with GDP and core PCE to be watched
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4
Gold
Watch for: Weakness is a chance to buy as
support builds around the $1326 breakout
Outlook: The now 14 week uptrend continues to
be a strong basis of support for a continued
recovery in gold. Last week’s breakout above
$1326 was the latest bull move which should
allow the market to pull ever higher towards a
retest of the 2018 highs at $1366 again.
Momentum indicators remain strongly configured
and weakness is a chance to buy. The long term
pivot band between $1300/$1310 is underlying
as support and the uptrend is now above $1310
this week. The support is forming around the
$1326 breakout.
Markets Outlook
Brent Crude oil
Watch for: A recovery to the 50% Fibonacci
retracement and the implied target at $68.75
Outlook: The market continues to track higher
following the breakout above $63.75 and the
upside projection target at $68.50 is well within
reach this week. Consolidation around the 50%
Fibonacci retracement of the big bear run of
$86.75/$49.95 which comes in at $68.35 should
not be ruled out too. Momentum indicators are
strongly configured with the RSI up in the 70s,
MACD lines rising above neutral and Stochastics
bullish which suggests that any weakness
should continue to be seen as a chance to buy.
The market is on its way towards recovering to
the long term pivot around $70.

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