Traders continue to react to the mixed Non-farm Payrolls report on Friday that hampers building expectation for a fourth rate hike by the Fed this year. However attention will turn back to US inflation this week, with the core CPI data, whilst Trump's trade tariffs are still on investors' minds. We consider the outlook for forex, equity indices and commodities markets.

1. Weekly Outlook
Monday 12th March 2018 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.
WHEN: Tuesday, 13th March, 1230GMT
LAST: Headline +2.1%, Core +1.8%
FORECAST: Headline +2.1%, Core +1.8%
Impact: Inflation expectations continue to climb, but
hard data is struggling to be a match. Core PCE
remains anchored c. +1.5% whilst payrolls showed
average hourly earnings dropping back after spiking
last month (one swallow does not make a summer). So
the core CPI will be watched keenly to see if there are
any signs of life in inflation for consumer prices. Again,
this month is expected to remain subdued at +1.8%,
but any upside surprise to this would be a 10 month
high and argue the fires of inflation are being stoked.
The 10 year Treasury yield and dollar will move.
Key Economic Events
Date Time Country Indicator Consensus Last
Tue 13th Mar 1230GMT UK Spring Budget Statement
Tue 13th Mar 1230GMT US CPI (headline / core) +2.1% / +1.8% +2.1% / +1.8%
Tue 13th Mar 0200GMT China Industrial Production / Retail Sales +6.1% / +9.8% +6.2% / +9.4%
Wed 14th Mar 1230GMT US Retail Sales (ex-autos MoM) +0.3% 0.0%
Thu 15th Mar 0830GMT Switzerland Swiss National Bank monetary policy No change -0.75% No change -0.75%
Thu 15th Mar 1230GMT US New York Fed Manufacturing (Empire State) 15.0 13.1
Fri 16th Mar 1000GMT Eurozone CPI (final – headline / core) +1.2% / +1.0% +1.2% / +1.0%
Fri 16th Mar 1230GMT US Building Permits / Housing Starts 1.30m / 1.28m 1.40m / 1.33m
Fri 16th Mar 1315GMT US Industrial Production (m) / Capacity Utilization +0.2% / 77.6 -0.1% / 77.5
Fri 16th Mar 1400GMT US University of Michigan Sentiment (prelim) 97.0 99.7
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1N.B. Please note all times are Greenwich Mean Time (GMT), data source Reuters
Macro Commentary
Once again I find myself writing about the impact that Donald Trump is having on financial markets, as irksome as it
may be. Trump’s tariffs have brought almost widespread condemnation, they have resulted in the resignation of his
chief economic advisor, whilst GOP officials have also urged the President to reconsider. Risk appetite has been
thrown around by protectionist fears and subsequent prospective exemptions. Markets tend to go overboard on
Trump expectations and the protectionist fears is another example of this that is still now being unwound as we
come into this week. However there is still a trend of concern with regards to a President so myopic to the second
round impact that tariffs will undoubtedly bring about. This is a trend that will damage the dollar over the medium to
longer term and is something that plays into the argument that this administration does indeed see the benefits of a
weaker dollar. Moving into the new week, US inflation is once more a key factor for traders. Even though the 5 year
breakevens rates continue to climb to multi-year highs above 2.15%, we are yet to see any hard data that
sustainably points towards inflation. The core PCE remains subdued, whilst February’s surprise jump in average
hourly earnings unwound considerably in Friday’s Non-farm Payrolls report. Are we finally set to see CPI picking up
this week? Any positive surprise would see the 10 year yield back towards 3.00% and the dollar stronger.
Must Watch for: US CPI
US core CPI
If core inflation starts to show signs of ticking higher then expect
longer dated yields to rise.

2. Weekly Outlook
Monday 12th March 2018 by Richard Perry, Market Analyst
Foreign Exchange
The dollar comes into the new week on the front foot after a series of factors have bolstered the bulls in recent
days. The question is whether the rally is enough to drive a sustainable turnaround in sentiment or whether,
strength will be seen as another chance to sell. I sense that latter. Longer term factors such as the growing twin
deficits and the maturing Fed tightening cycle continue to suggest the dollar will remain under pressure.
However, the dollar benefitted from Mario Draghi talking down the euro down, whilst the market is also now
unwinding some of the negative protectionist scenarios on Trump’s trade tariffs. However, these are near term
factors that do not change the bigger picture of long term dollar weakness. The US Trade Weighted Dollar
Index shows a band of resistance still in place 91.00/91.50 that remains a medium term sell-zone where rallies
are likely to fade. Mario Draghi did a superb job of talking down the euro as the ECB removed its easing bias.
However, the ECB is now on a path towards a potentially significant announcement on winding down its Asset
Purchase Programme at the June meeting. This should help to underpin the euro going forward and means that
weakness remains a chance to buy. Sterling is also a near to medium term underperformer as Brexit politics
ramp up in front of the EU Summit on 22nd March. Expect this to continue to weigh on sterling until the transition
period is agreed. The Canadian dollar has been boosted from the tariff exemptions but NAFTA remains a drag.
WATCH FOR: US core CPI is massive, with US Retail Sales also set to drive the dollar
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2
FX Outlook
USD/JPY
Watch for: The resistance 107.65/107.90 is key
for a positive outlook to sustainably take shape.
Outlook: The key eight week downtrend was
decisively broken on Friday to damage the
bearish outlook. In recent weeks the market
seems to have been bought every time there has
been a look at the support at 105.50. However, a
broken downtrend does not mean the bulls are in
control, it simply questions the strength of the
bear argument. There needs to be a key reaction
high broken to start to construct a sustainable
recovery of an uptrend. That means resistance
at 107.65/107.90 is key this week. Momentum
indicators have ticked higher but also need to
see a sustainable improvement. For now rallies
will still be seen as a chance to sell but the bulls
have at least got a handle on this market now.
EUR/USD
Watch for: A support band around $1.2150
remains a key area for the longer term bulls.
Outlook: The long term uptrend supports the
euro between $1.2130/$1.2160 this week. With
the 50% Fibonacci retracement of the QE driven
sell-off from $1.3992/$1.0340 at $1.2165, along
with the key February low at $1.2155, this
means that there is a confluence of support
which should help to underpin any euro
weakness. Technically (as well as
fundamentally) the euro therefore remains a long
term buy into weakness. The near term
momentum indicators are still pointing at a slip
lower, but the medium to longer term bulls will be
eying their opportunity.

3. Weekly Outlook
Monday 12th March 2018 by Richard Perry, Market Analyst
Equity Markets
With risk appetite picking up again as the White House opened the prospects of exemptions to the Trump trade
tariffs, the outlook for equity indices has improved. However the negative impact of the trade tariffs remains, with
US corporates worried. Steel and aluminium tariffs may help the direct US producers but the second round
impact is far les positive for importers of (especially specialist) steel products. Eaton Corp for example which is a
big industrial company expects that the tariffs could increase its raw material costs by $50m. How will China
respond? Will it diversify away from using US companies such as Caterpillar in its huge infrastructure spend on
its “One Belt, One Road” initiative? Foreign direct investment could also be impacted as companies such as
Hyundai which has previously promised to spend $3.1bn over the coming 5 years have said tat tariffs could
negatively impact on US production and further expansion. No wonder that US markets and export heavy indices
such as the DAX are so reactive whenever the negative impacts of the tariffs hit sentiment. However, if the
politics calms down and Trump waters down his proposals with widespread exemptions the outlook on equities
can continue to improve. There is an improving outlook on Wall Street as we move into the new week as the
resistance of the late February rebound highs come back into view. The resistance at 2789 on the S&P 500 will
be keenly watched. Although the recoveries in European markets remain a lot less developed, there are key
moves to watch. With a sustained move above 7200 on FTSE 100 opening resistance of the reaction high at
7326, whilst the DAX needs to hold above 12,285 to maintain the improved outlook for a test of 12,600.
WATCH FOR: How risk appetite responds to US CPI will be key. Trump’s tariffs are also still important.
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3
DAX Xetra
Watch for: Holding above 12,250/12,285 keeps
the recovery on track this week.
Outlook: European indices are way behind US
counterparts when it comes to this recovery.
However the DAX has now broken a seven week
downtrend of the sell-off in a move that begins to
make more of a considered technical
improvement. The support band 12,250/12,285
which is the 23.6% Fibonacci retracement of the
sell-off from 13,597/11,831 and an old pivot
gives the market a floor for the bulls to work from
this week. A strong reaction will see traders
eying the resistance band 12,500/12,600 which
is key on a medium term perspective now.
FTSE 100
Watch for: Consistent trading above 7200
maintains an improving outlook in the range.
Outlook: A run of positive closes throughout last
week has improved the outlook. However since
the market started to bottom following the
original sharp February sell-off, it has effectively
been trading in a range between 7062 and 7326.
Within that band, there is a mid-range pivot
around 7200 which has been a gauge for near
term sentiment, but the bulls cleared this on
Friday to re-open the upside within the range
again. There is an improving configuration on
momentum indicators however for now this is still
just unwinding the huge selling pressure.
Another failure under 7326 would again be a
concern for the bulls.
Index Outlook

4. Weekly Outlook
Monday 12th March 2018 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Any dollar strengthening remains a drag on the gold price. Add in the reduced geopolitical risk from the
prospective meeting between Trump and North Korea’s Kim, and there is a double negative impact on precious
metals. However there would need to be a decisive rally on the Dollar Index above 91.00/91.50 resistance that
would drive a key breakdown on gold. Currently the market is stuck in a sideways range as the bulls have
gradually lost their momentum. The reaction to US CPI this week could be interesting, especially if the dollar
gains traction from an upside surprise in CPI. However, as the dollar rallies off inflation increases there is a
diminishing impact on a gold sell-off, as gold is seen as an inflation hedge. If the Fed is forced to be more
aggressive due to inflation then there is an argument for gold to perform strongly. For now $1300 remains the
key support. Oil is being thrown around by the tariffs story in the near term, and as the prospects of a trade war
diminish, oil is looking to find support. However increasing US production, rig count and inventories is a drag.
US yields increased in the wake of the Payrolls report. However it was interesting to see the dollar is still not
playing ball. Perhaps this will be different this week with the CPI data, but for now as the 10 year yield pushes
back above 2.90%, the significantly psychological 3.00% comes ever closer. The high in February was 2.957%
but the key move on a technical basis would be above 3.04%, above which is a high dating back to July 2011.
WATCH FOR: US core CPI will impact on yields and commodities, also watch US Retail Sales
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4
Gold
Watch for: The long term pivot band remains
supportive at $1300/$1310 as the market ranges
Outlook: The market has formed a medium term
range in recent weeks as first the bulls have
failed to breakout above $1366 and the market
subsequently remained supported above the
longer term pivot band $1300/$1310. There is a
mildly negative near term bias on momentum
indicators but taking a step back and there is a
lack of intent on either side that suggests the
range will continue. The resistance in place at
$1341 is capping the upside whilst moves
towards $1310 continue to be bought into. Will
we start to see some direction on gold this week
following the CPI data? For now the market is in
need of a catalyst to break the range.
Markets Outlook
Brent Crude oil
Watch for: Support at $63.20 remains key to
continue a positive medium/longer term outlook
Outlook: The long term uptrend held firm on
Friday as a strong rebound helped to prevent
Brent Crude from breaching the late February
low at $63.20. However there is a near term
corrective configuration on momentum indicators
which is still a drag on the oil price. The bulls will
be subsequently keeping an eye on the
resistance of a pivot around $66 this week. On a
medium term basis there is a mixed
configuration on momentum and there is still a
positive longer term outlook that suggests buying
within the uptrend remains viable. This week is
important for maintaining this trend.

5. Weekly Outlook
Monday 12th March 2018 by Richard Perry, Market Analyst
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5
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