Janet Yellen has bolstered expectations of the next move from the Fed coming this summer with a suggestion that the next hike “would be appropriate” if the economic data continues to improve. So there will be a big focus on the US economic data this week with PCE, ISM and of course Non-farm Payrolls this week

1. Weekly Outlook
Monday 31st May with 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: Fri, 2nd June 1330BST
LAST: 160,000
FORECAST: 161,000
Impact: With the FOMC minutes focusing on improving
trend of growth, labor market and inflation and
supposedly data dependent, this week’s deluge of tier
one economic data will be key. Specifically though the
final Employment Situation report before the June
FOMC with payrolls and wage growth will be key. The
expectation for payrolls to stick around last month’s
disappointing level at 161,000 (watch out for revisions
too), whilst average hourly earnings will also be key
and are expected to maintain the recent improvement
to +2.5%. Expect dollar volatility.
Key Economic Events
Date Time Country Indicator Consensus Last
Tue 31st May 13:30 US Personal Consumption Expenditure (core YoY) +1.6% +1.6%
Tue 31st May 15:00 US CB Consumer Confidence 96.0 94.2
Wed 1st Jun 02:00 China Manufacturing PMI (official) 50.0 50.1
Wed 1st Jun 09:30 UK Manufacturing PMI 49.6 49.2
Wed 1st Jun 15:00 US ISM Manufacturing PMI 50.5 50.8
Thu 2nd Jun ALL DAY OPEC Bi-annual meeting n/a n/a
Thu 2nd Jun 12:45 Eurozone ECB monetary policy (and press conference) 0.00% 0.00%
Fri 3rd Jun 09:30 UK Services PMI 52.5 52.3
Fri 3rd Jun 13:30 US Non-farm Payrolls / Average Hourly Earnings +161k/+2.5% +160k/+2.5%
Fri 3rd Jun 15:00 US ISM Non-Manufacturing PMI 55.5 55.7
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1N.B. Please note all times are BST (GMT+1), data source Reuters
Macro Commentary
Janet Yellen has bolstered expectations of the next move from the Fed coming this summer with a suggestion that
the next hike “would be appropriate” if the economic data continues to improve. So big focus then this week on the
PCE, ISM data points, and of course Non-farm Payrolls this week, all of which are releases with the next Fed
meeting just a couple of weeks away. Not only that, the average hourly earnings will also be key and considering
the payrolls are expected to be another tepid 161,000, with the unemployment rate seemingly close to full levels,
now is the time for wage growth to pick up the baton of recovery. Discussion will be of the Phillips Curve and
NAIRU again. The dollar has been strengthening in recent weeks and is hitting across the major markets now.
However the economic data still needs to back up the hawkish comments from FOMC members. However, that is
not all, with the European Central Bank set to begin its corporate bond purchases the weakening euro will have
come as something of a respite as the Governing Council meets. Another intriguing add to the mix is that OPEC
meets for its bi-annual meeting this week. With the oil price having rallied over 90% since the February lows, the
desperation facing some of the OPEC members has been reduced, with the oil market closer to balance again.
Despite this though these meeting tend to have the capacity to surprise so watch for volatility across markets.
Must Watch for: US Employment Situation (Non-farm Payrolls)
US Average Hourly Earnings
Is wage growth finally finding some upside traction?

2. Weekly Outlook
Monday 31st May with Richard Perry, Market Analyst
Foreign Exchange
The strength of the dollar has been a feature of recent weeks as the prospects of a rate hike have been
dramatically changed from the market pricing in potentially December to now looking likely in the next couple of
meetings. This would have come as a relief for both the Bank of Japan and the European Central Bank which
have seen both their respective currencies weaken in the past few weeks. The yen is a classic gauge of the
market’s view of safe havens and with the 500 pip rally on Dollar/Yen in the past four weeks this has come as
general market sentiment has also turned more positive. Forex majors have been underperforming the dollar on
a consistent basis throughout May but the interesting best of a bad bunch is sterling. Having previously been
hamstrung by concerns over the threat of a Brexit, the opinion polls have been far more supportive for the
Remain camp in the last couple of weeks. The market is settling down for the UK to stay in the EU and this has
allows sterling to find support again. This clearly brings with it the risk of sterling suffering again in the event of
the polls tightening again, but for now sterling is solid and a Remain victory is likely to drive Cable back above
$1.5000 once more. There is still room for volatility in the next few weeks to the vote on 23rd June but a
repricing for the UK to avoid a Brexit now seems to be able to hold up sterling performance.
WATCH FOR: US data driving the dollar including PCE, ISM Manufacturing & Non-Manufacturing, and
Non-farm Payrolls. The ECB will be the focus for the euro. Brexit polls will impact sterling.
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2
FX Outlook
GBP/USD
Watch for: Holding on to the support above
$1.4440 maintains an improving outlook
Outlook: Cable has ben chopping around with
the fluctuations of the Brexit polls, but the
performance of sterling has been positive
recently. The uptrend revival since the April low
around $1.4000 continues and leaving a series
of higher lows is helping to improve the medium
term outlook. Momentum is positively configured
and pressure seems to be building to the upside.
Corrections are a chance to buy within the
uptrend which supports around $1.4475. The
next few weeks will be highly volatile for Cable
with the FOMC announcement and the UK’s EU
referendum. However technically the
improvement continues.
EUR/USD
Watch for: The long term pivot band around
$1.105/$1.1100 is being tested
Outlook: A strengthening dollar is a pull lower
on EUR/USD with a series of lower highs and
lower lows in the past four weeks. This move
back from the May high at $1.1615 has now
unwound over 500 pips on the pair at the nadir.
However now the long term pivot band is firmly
back in play. The 50 pip range between $1.1050
and $1.1100 has consistently been a big turning
point for the pair in the past 17 months and this
is a level which will now be keenly watched. If
the strong dollar continues to be a drag, then the
outlook will quickly flip negative with the next
support not until the Q1 2016 key support
around $1.0800. Resistance at $1.1215/$1.1245
will be key this week.

3. Weekly Outlook
Monday 31st May with Richard Perry, Market Analyst
Equity Markets
It might have taken them a while to get going in May, but equities have performed well in the past month. So
does this mean that “Sell in May and go away” has not worked this year? The data for the old market adage
that advocates shutting up shop for the summer is rather mixed and certainly this year actually saw gains in the
month of May (unless there is a huge late sell off this afternoon). However, this is likely to be more a part of a
choppy range in stocks rather than the resumption of any strong trend higher. With the comments from Janet
Yellen last Friday failing to dispel any myths of the more hawkish FOMC members, we are led to believe that
the Fed is closing in on its next rate rise. A hiking Fed would be a headwind for equities if it drives a stronger
dollar. This comes as the S&P 500 is not far off its highs for the year. The S&P 500 is trading on around 19.7x
but on a cyclically adjusted basis this is over 26x (where over 25x is considered to be increasingly stretched).
Can equities continue to run higher in this environment? The oil price rally has certainly bee supportive and is a
gauge of improved market risk. However, equities appear to have lost their positive correlation to the oil rally in
recent weeks (at least for the time being). In Europe, the technicals have been positive of late but the medium
to longer term signals are rangebound and once more this suggests that there is limited upside. The one big
variable for the FTSE 100 though is the EU referendum. Remaining in the EU would be supportive for UK
equities and this could break the shackles at least in the near term.
WATCH FOR: US economic data driving Wall Street, whilst Brexit opinion polls could be set to impact
on FTSE 100.
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3
German DAX
Watch for: Key Fibonacci levels are still a key
reference
Outlook: The strong run in the past week could
be considered to be the bulls gaining control,
however the technicals continue to look as
though this is a move higher within in a medium
term consolidation range. The Fibonacci
retracements of the big bull run 8355/12,390
have been key for the DAX for months now and
once more the rally has hit the overhead barrier
of a Fib level (this time 50% Fib around 10,370).
However the RSI is now at a level where
previous moves higher have struggled (c. 60)
and with key resistance at 10,475 is this time for
a pause and some profit-taking?
FTSE 100
Watch for: Expect further trading around the
6200 pivot
Outlook: The rally through 6235 was a key near
term move, but this level could now be ready to
take on more of a pivot level within what seems
to be forming as a medium term range play. The
FTSE 100 has spent the past three months
trading between 6036 (which remains key
support) and 6427 (the key April high). In the
middle of this band lies old support/resistance
line around 6235. Momentum indicators have
picked up I the past week but the RSI is again
rolling over around the 60 level and the
Stochastics are also losing steam. Above 6235
is a positive outlook but there seems to be a lack
of conviction that will constrain the bulls. This is
likely to continue at least until the EU
referendum.
Index Outlook

4. Weekly Outlook
Monday 31st May with Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
With the Fed moving towards a potential rate hike, the strengthening dollar has been a drag on precious metals.
This has been to the extent at which silver has been a drastic underperformer (if it was considered to be a
major currency), with the gold price not too far behind. At its nadir, gold had lost over $100 of value in the
course of four weeks. Any economic data that will add to the arguments for the hawks now will be a drag on
gold. The oil price rally has been consistent in the past few weeks as a series of supply disruptions (Canada oil
sands, Venezuela, Nigeria) have helped to bring supply and demand back into balance. The OPEC meeting
this week adds extra spice and volatility, with traders looking out for comments on issues over supply. However
the rally has taken the urgency out of supply caps/reductions so this meeting could be less focused.
With the shorter end of the Treasury yield curve reacting to the potential for a hike, yields have gone up.
However the longer dated end of the curve looks far more towards growth potential and in the past month there
has been a far more muted reaction which suggests there is still some concern over future growth prospects
leading to a somewhat flatter yield curve. UK yields have been constrained by the threat of a Brexit, but there is
more of a confidence at the shorter end of the curve, and the opinion polls will be a driving factor in the coming
weeks.
WATCH FOR: US data is key this week with PCE, ISM and Non-farms all driving volatility.
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4
Gold
Watch for: The support at $1190 is crucial, with
a break inducing a negative outlook
Outlook: As the correction has continued on
gold the price is at a very real risk of breaking
through a crucial support at $1190. In the first
quarter of the year a band of support was formed
between $1190/$1208 but this is under
significant threat now. A two day closing break of
this support would confirm a large medium term
top pattern that would continue the retracement
of the December to May bull run. Momentum
indicators suggest that there is a mounting
negative configuration in which rallies are seen
as a chance to sell. Below $1190 opens an old
pivot band around $1165.
Markets Outlook
Brent Crude oil
Watch for: A near term correction would remain
another chance to buy
Outlook: The uptrend may be slow but it is a
steady run higher with a series of higher lows
and higher highs in place consistently since the
January low. The breach of the psychological
$50 level has re-opened the November high at
$50.90 but also increasingly a full retracement to
the October high at $54.05. The OPEC meeting
this Thursday could drive volatility but any
weakness will continue to be seen as a chance
to buy. The initial support at $47.40 becomes
the first key reference for the bulls now, whilst
the uptrend channel for the medium term support
does not come in until $44.50 this week.

5. Weekly Outlook
Monday 31st May with Richard Perry, Market Analyst
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5
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