Week of October 9

US Jobs numbers and whether it will be enough to sway the Fed was the largest data point of the last week, with the RBA and RBNZ rate pauses the main monetary policy events. Over the coming week, investors will be keen to get the latest inflation numbers from the US, the FOMC minutes, and China's trade balance.

Top Events in Review

The week commenced on an optimistic note after the US managed to avoid a government shutdown, but politics was thrown almost immediately into disarray as the House Speaker lost a motion to vacate and was forced to step down. US yields pushing higher raised concerns that markets could face liquidity challenges as the cost of borrowing keeps increasing. 

US ISM Manufacturing hit a high for the year so far, with prices underperforming and raising hopes that inflation pressures might abate. Fed officials expressed views that recent rising bond yields were equivalent to a rate hike, which could mean further tightening by the FOMC might not be necessary. 

European PMIs all exceeded expectations but remained firmly in contraction. Some ECB officials reiterated that current policy is restrictive, maintaining expectations that rates will stay steady for a long time, while others pointed to the effects of tighter financial conditions.

The RBA held rates unchanged, with analysts almost evenly divided ahead of the event. The bank kept the door open for further hikes in what was seen as an attempt at a "hawkish pause". The RBNZ's pause was more dovish, suggesting no rate hike at the next meeting, which would occur following the upcoming General Election. 

The OPEC ministerial meeting ended with no change in production targets or outlook for the market. But Saudi Arabia raised its November prices for crude sales in Europe and Asia, indicating optimism about oil demand.

Biggest Market Movers

The dollar pushed higher from yields reaching their highest since 2007, allowing the greenback to set fresh ten-month highs at 107.36. Expected support lower down lies at 105.62.

WTI collapsed over 9% through the week, erasing all the gains of September, as investors worry that higher prices might have hurt demand. Losing the $80 handle a barrel could weigh on prices further, increasing speculation for $77.60.

The yen gained over 1.50% against the greenback after reports that the BOJ intervened in the currency past 150. Still, post-rumor analysis suggested such intervention had not occurred, and price pressures eased, leaving support at 147.30.

Gold prices slid 2% to reach a March low as rising bond yields made holding the precious metal unattractive. If bulls can take back control of $1850 an ounce, the tide may shift. Otherwise, $1800 will be one of the supports to watch.

Top Events in the Week Ahead

US inflation figures are expected to be the week's highlight, as investors are still determining if the Fed will go through with a final rate hike in November or December. The headline rate is forecasted to tick up to 3.8% from 3.7%, aided partly by higher gas prices after crude spiked through September. But the core inflation rate the Fed follows more closely is expected to drift lower to 4.1% from 4.3%. 

Investors will be pouring through the minutes from the latest FOMC meeting to see how committed members are to the forecasts before the CPI release. Is a rate hike before the year is out, and what conditions might substitute for a rate hike in light of the recent higher yields? 

EUR/USD has major support at $1.05 only a steep decline could take out, leading to $1.04 next. Continuing its ascend past $1.06 will see chances of reaching a $1.0675 increase.

China Trade Balance and Global Economy

China will report its data that had been delayed from last week due to the national holiday, with new yuan loans expected to grow as the government tries to boost the domestic economy. The key data is likely to be the trade surplus, which is expected to shrink once again as trade with the Asian giant slows down. Both imports and exports are anticipated to be lower than a year ago, which is significant considering the Chinese economy was still under covid restrictions.

In another sign of slowing economic activity in the world's second-largest economy, the inflation rate is expected to be a mere 0.2%, up from 0.1% last month.

USD/CNY might finally break out of its narrowing range, with 7.35 and 7.25 likely to offer an initial bounce.

UK GDP and Industrial Activity

Monthly GDP from the UK for August is expected to show another negative figure for the third quarter at -0.1%, on top of the -0.5% recorded in July. The rolling three-month average, however, is expected to pop up to 0.4% from 0.2%, as the British economy remains surprisingly resilient, despite slowing manufacturing and industrial production forecast for August.

Sterling's upward leg could continue towards $1.23 but will unlikely get through initially. $1.2132 is a short-term swing support bulls will want to keep an eye on as if lost, that $1.20 attempt might finally pan out in the end.

Other events, earnings

Tuesday has Australia Westpac and NAB confidence surveys. Wednesday sees the final German inflation figures as well as the US PPI. On Thursday, Japanese machinery orders will come out. Eurozone Industrial production is expected on Friday. 

This week sees the unofficial start of earnings season with the reports from the major US banks, such as JP Morgan, BlackRock, Citigroup, Wells Fargo and PNC. Also reporting are United Health, Pepsico, Fastenal, Delta Airlines and Walgreens Boots Alliance.