Market Review - Fundamental Perspective - 21 May 2018

US and core European equities were relatively well behaved last week despite US 10y Treasury yields rising up to 3.11% and oil prices approaching $80 per barrel. In FX, the USD Bloomberg Spot Index rallied amid rising US Fed rate hike expectations bolstered by relatively resilient US data
USD received further support from a US-China trade truce. While there has not been a formal agreement, communications have had a more cooperative tone
Meanwhile, the EUR has suffered from ongoing political uncertainty in Italy. EURUSD ended last week 1.8% down and is pushing to new YTD lows this morning
Lega and 5SM will likely propose a cabinet to President Mattarella as early as today, and current headlines focus on the appointment of the possible Premier. Further EUR downside may persist as we learn more
GBPUSD also fell last week on the back of Brexit headlines concerning the Customs Union. Sterling will likely continue to be vulnerable to headline risk this week, but focus will also be on domestic data releases, including inflation (Wednesday), retail sales (Thursday) and GDP numbers (Friday)
Our traders currently see GBPUSD support at 1.3400 and resistance at 1.3450. EURGBP support comes in at 0.8690-0. 8720 with resistance at 0.8760-80
EM remained under pressure last week, with EM dedicated bond and equity funds experiencing their worst week of outflows since the volatility spike in February. Notable underperformers include TRY, ZAR and BRL which all lost 3.5%

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