The FOMC minutes last Wednesday have completely changed the market’s perception of a September rate hike. Traders have assessed the minutes that suggested more improvement needed to be seen in the data before “most” of the committee would shift stance. Since the latest FOMC meeting, there has been a series of aspects that can only have emboldened the resolve of the doves on the committee. A 3% devaluation for China (which has been seen as deflationary), the significant depreciation of Emerging Markets currencies (also deflationary), commodities such as oil and base metals have continued to plummet (again deflationary), whilst domestic inflation for July has US remained stubbornly low.

1. Weekly Outlook
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24th August 2015 by Richard Perry, Market Analyst
Macro Commentary
The FOMC minutes last Wednesday have completely changed the market’s perception of a September rate hike. Traders
have assessed the minutes that suggested more improvement needed to be seen in the data before “most” of the
committee would shift stance. Since the latest FOMC meeting, there has been a series of aspects that can only have
emboldened the resolve of the doves on the committee. A 3% devaluation for China (which has been seen as
deflationary), the significant depreciation of Emerging Markets currencies (also deflationary), commodities such as oil
and base metals have continued to plummet (again deflationary), whilst domestic inflation for July has US remained
stubbornly low. This change of sentiment is impacting across asset classes. Treasury yields have fallen sharply, with the
more volatile long end of the yield curve particularly under downward pressure (as concerns over future growth persist)
reflecting increased safe haven flows. The dollar has subsequently undergone a sizeable correction, whilst gold (another
market with a negative correlation to the dollar) has also rallied strongly. My expectation is that it could now be a choppy
medium term outlook ahead for the US dollar, especially if concerns over China and commodities persist.
WHEN: Fri 28th Aug, 1330BST
LAST: +1.3%
FORECAST: +1.3%
Impact: As part of the Fed’s dual mandate it is
legally obliged to target low and stable inflation.
The Fed is targets 2.0% inflation and the PCE is its
preferred measure. The core reading (strips out
volatile food and energy) has been stuck at +1.3%
for 6 months now and if a consensus monthly
increase of +0.1% is hit this will again show no sign
that PCE is picking up. The FOMC minutes said
recently that conditions had not been met to raise
interest rates and this is most certainly a key
factor. Year on year core PCE at 1.3% again would
almost guarantee no hike in September and would
be negative for the dollar and Treasury yields.
Must watch for: Personal Consumption Expenditure
Key Economic Releases
Date Time Country Indicator Consensus Last
Tue 25th Aug 09:00 Eurozone German Ifo Business Climate 107.8 108.0
Tue 25th Aug 15:00 US Consumer Confidence 93.3 90.9
Tue 25th Aug 15:00 US New Home Sales 510,000 480,000
Wed 26th Aug 13:30 US Durable Goods Order (MoM) +0.4% 0.8%
Wed 26th Aug 15:30 US Crude oil inventories +2.6m
Thu 27th Aug 13:30 US Q2 GDP (Preliminary) +3.2% +2.3%
Thu 27th Aug n/a n/a Jackson Hole Economic Symposium
Fri 28th Aug 00:30 Japan CPI +0.0% +0.4%
Fri 28th Aug 09:30 UK Q2 GDP (second reading) +0.7% +0.7%
Fri 28th Aug 13:30 US Personal Consumption Expenditure (core) +1.3% +1.3%
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1N.B. Please note all times are BST (GMT+1), data source Reuters
US Core PCE

2. Weekly Outlook
24th August 2015
by Richard Perry, Market Analyst
Foreign Exchange
Major pairs may have started to turn a corner in the past week. The driver has been a dovish set of meeting minutes from
the Fed which have pushed back expectations of a September rate hike. The China devaluation has certainly played into
this trade too and now we are faced with an interesting outperformance on the euro. The short euro positions are being
unwound and this is puling the EUR/USD pair higher. Unwinding the euro carry trade has driven the euro through its key
June resistance and a multi month high. Safe haven flows have increased in the wake of the latest set of disappointing
China flash manufacturing PMIs and this has benefitted the yen and Swissy. The other interesting move on the forex
majors is the performance of the commodity currencies (Aussie, Kiwi and Canadian dollar) which are conflicted between
the potential delay of a Fed rate hike and the rout in commodity prices. How the relative importance of the two
arguments are balance will determine potential moves. On Monday it seems as though the rout in commodities is being
given the bigger weighting. Also interestingly, is the relative performance of sterling versus the dollar. The market is still
questioning the relative impact of the commodity decline on both central bank potential rate hikes.
WATCH FOR: A raft of US data this week, with US GDP a key release, but the core PCE on Friday will be a
big driver. The rhetoric from FOMC members at Jackson Hole will also create volatility in forex markets.
EUR/USD
Watch for: Holding an upside break of the
medium term trading band at $1.1465
Outlook: A flag breakout hitting its target at
$1.1370 has been a remarkable rally but the
euro is not stopping. Near term momentum
is strong, and now the bulls will need to hit a
closing break of key resistance of the top of
the broad sideways trading band at $1.1465.
I see this as a near term reaction rather than
a move that will be sustainable and I expect
the profit taking to set in, but momentum is
strong in the meantime. I see a choppy euro
in the coming weeks and the pivot band
$1.1050/$1.1100 still to play a role.
NZD/USD
Watch for: Holding on to the trading band
above $0.6500
Outlook: After trading sideways for several
weeks (having seemingly formed some
meaningful support), the rally on the Kiwi
come under some pressure today. But is this
enough to induce further declines that
would break the consolidation range. So far
there is no sense on the momentum
indicators that there is any substantial
deterioration and depending on whether
support can hold, the performance of the
Kiwi remains rather strong still. 980. The
bulls will note that the outlook will remain
decent within the range whilst the pivot
support at $0.6550 is intact.
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FX Outlook
2

3. Weekly Outlook
24th August 2015
by Richard Perry, Market Analyst
Indices
Although huge sell-offs (and subsequent rebounds) have been a feature of trading major equity markets during 2015, the
nature of this latest decline has been particularly vicious. As the concerns over how China continues to slowdown have
grown, we have seen equity markets fall to multi month lows. It would appear that although Wall Street has been relative
sheltered from selling pressure in the past few months, even the S&P 500 has started to break key support levels.
Although the S&P 500 is only just under 8% off its all time highs, the market ended last week at its lowest level since
October. The disappointing earnings season is drawing to a close and traders are concerned over the impact that the
slowdown in China is having on corporate earnings growth. The decline could be insulated to a certain extent by the fact
that the FOMC is increasingly unlikely to hike rats in September now. This is driving increased Treasury flows and a dollar
correction which could help to pull the reins on fears of an ever strengthening dollar (at least for the near term). FTSE 100
is now over 14% off its 7122 high of April but the 26% weighting in commodities is a big drag. The DAX is now down
around 20% from its April peak (bear market territory) amid fears for a market that heavily exports to China.
WATCH FOR: Focus will remain on China and how commodity markets move as concerns over global
demand continue to impact on sentiment.
DAX Xetra
Watch for: Old support band 10,000/10,100
is now resistance
Outlook: The DAX has blown support out of
the water. All the levels in recent months
which had previously acted as solid level and
turning points have mattered little as the
bear pressure has ripped through the DAX.
The market is now back at levels not seen
since January. The support band between
10,000/10,100 has been breached and could
act as resistance. The DAX is short term
oversold with the RSI in the low 20s and this
could induce a snap rally this week, however
beware catching a falling knife.
FTSE 100
Watch for: Key support levels at 6145 and
6073 are now close
Outlook: The FTSE 100 had fallen well over
500 points in two weeks at Friday’s close,
however the sell-off is now getting to the
stage of becoming exhaustive. The daily RSI
is now back at 17 and is the lowest since
August 2011 (weekly RSI at 30 is also
stretched). This does not necessarily mean a
technical rally is imminent, but the support
around 6000 is now into play and this may
see the sell-off stall near term. The problem
becomes timing now as a falling knife can be
painful to catch but a snap back rally can be
equally as sharp. Difficult times for
investors.
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INDEX Outlook
3

4. Weekly Outlook
24th August 2015
by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
The rout on commodities has become somewhat dichotomised recently as the precious metals have rallied strongly
whilst commodities linked to economic growth (oil and base metals) have come under almost relentless pressure. The
divergence has been driven by a big shift towards safe haven trading, which gold has particularly benefitted from. The
downtrend on oil has been punctuated by rallies that continue to be sold into and with supplies remaining strong and
demand hit from a China slowdown, there is little to suggest the buying will return yet. A rebound on gold has hit an
initial band of resistance and the gold bug will do well to avoid selling pressure but a continuation of the current general
bearish market sentiment will help to support.
Safe haven flows are moving investors back into Treasuries, Bunds and Gilts again. For Treasuries, this move is also
coming in the wake of the dovish FOMC minutes which have reduced the likelihood of a September rate hike. If the
commodities rout continues then expect the long end of the US yield curve to continue to flatten.
WATCH FOR: A whole raft of US data can drive commodities this week, with focus also on sentiment out of
China too. Jackson Hole will dive volatility as various speakers will move expectations of a September hike.
Gold
Watch for: Reaction to the resistance
band $1162/$1170 is key to the recovery
Outlook: The bullish recovery got a new
lease of life after the FOMC minutes and
has seen the price now bounce by over
7% in just over 2 weeks. Although the old
key floor at $1131.85 was paid scant
regard, the bulls had a bit of a stutter on
Friday as the next resistance band around
$1170 came into sight. This level becomes
a key test this week. If market sentiment
starts to improve you could see some
profit taking set in. Momentum remains
strong with RSI pushing towards 70.
Brent Crude
Watch for: A close below $45.20 is a multi
year low and opens $40
Outlook: With WTI pulling lower to levels
not seen since 2009, it has taken a while for
Brent Crude to pull down to similar levels.
However the downtrend has been
consistently negative for Brent Crude and it
has only seemed like a matter of time. A
breach of the January low at $45.20 opens
the initial support around $40 but as with
WTI there is very little reason not to expect
a test of the December 2008 low at $36.20.
Momentum indicators remain incredibly
bearish and there is little sign of any reversal
in sight.
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COMMODITIES & BONDS Outlook
4

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Weekly Outlook
24th August 2015
by Richard Perry, Market Analyst