Week of October 17

Third quarter earnings season starts with a host of major companies already warning results will be below expectations; will economic data be the same?

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The week in review

• US September CPI came in above expectations, affirming expectations that the Fed would continue to tighten. Stock markets had been underperforming through the early part of the week but managed a correction on Thursday. S&P rose more than 6% above its weekly low of 3490. 3640 remains support.
  
  
• BOE's Bailey insisted that the bank's support for the long end of the curve would end on Friday, sending the pound neat $1.0910 as traders worried about the health of pension funds should the issue not be resolved in time. Cable later recovered on rumours that PM Truss would do another "U-turn" on taxes, ending the week with over 2% gains. $1.15 is a ceiling for bulls. The Chancellor gave an ambiguous reply to the rumours, saying, "let's see", but insisted he would make a statement on the budget at the end of the month. 
  
  
• Oil fell through the week, giving back gains from the OPEC+ production cut, but remains bid above $85.70/bbl. Bulls must get past $93/bbl for further advances. 
  
  
• In geopolitics, concerns over increasing tension in the Russia-Ukraine conflict were heightened after US President Biden talked of nuclear "Armageddon", and both sides rejected peace talks.

TOP EVENTS IN The week ahead

Rout of Inflation Data

Inflation data will likely be the week's focus, with EuroZone, UK, New Zealand, Canada and Japan all reporting CPI figures for last month. EUR/USD is somewhat mixed between $0.9630 and $0.9860, and USD/JPY get closer to 150.00 daily, with 145.00 a significant support. But Germany's DAX has staged a more than 5% reversal from its weekly lows of 12000, with 13000 back in focus. 

Particular focus is on the UK, though, ahead of the ECB's policy meeting, with some notable comments from officials suggesting that the shared central bank won't be raising rates as much as its peers. Following the debacle in the bond markets and increasing concerns over lack of liquidity, UK's inflation data is likely to be highly scrutinised as the BOE's range of action to fight inflation is being restricted by economic uncertainty.

China in focus

The week starts with the Chinese Communist Party Congress, where Xi is expected to be affirmed as the country's leader in a precedent-breaking move. China will also report the first look at Q3 GDP, the first major country to do so. With economic activity hampered by covid, the world's second-largest economy is expected to report negative quarterly growth and annual GDP growth to be just 0.4% compared to the 3.5% reported previously. Industrial production also comes out simultaneously, which is expected to show a minor deceleration to 4.2%. On the other hand, retail sales for September are expected to advance.

Other events earnings

Tuesday has German ZEW economic sentiment, which is expected to show a minor improvement, though remain negative. Wednesday has US building permits, housing starts, and Australian employment change. AUD/USD has printed a pin bar and could rally towards $0.6450 unless the $0.6300 round level succumbs. Friday sees UK retail sales. Earnings season is expected to get into full gear with an avalanche of major companies reporting, including Antofagasta, Nokia, Renault, Goldman Sachs, Bank of America, Lockheed Martin, Nasdaq, Johnson & Johnson, Procter & Gamble, State Street, and of course, Tesla.