Trading Week Ahead

Central bank rate decisions dominated the week, with the Fed extending a pause and heavily hinting that no more hikes were coming, while the BOE kept rates unchanged but left the door open for more hikes if necessary. Global trade is expected to be the main focal point in the coming week, with most major countries reporting their international commerce statistics and the RBA holding its penultimate rate decision of the year.

Top Events in Review

The FOMC meeting on Wednesday was the week's highlight, as the Fed extended its pause in rate hikes, citing rising yields having already done some of the heavy lifting. In his post-earnings presser, Fed Chair Jerome Powell left the door open for hikes, but his comments and repeated use of "caution" left markets with the impression that the Fed was inclined to keep rates unchanged going forward. All three major indices were up over 4% ahead of the NFP.

Earlier in the week, the BOJ disappointed markets by not outright moving towards policy tightening but apparently allowing for yields to rise further in a policy statement that left much speculation on interpretation. USDJPY could soar to multiyear highs while trading above the 150 handle, with 151.80 and 148.20 in focus.

As expected, the BOE didn't hike either, with three dissenters calling for more policy tightening even as the bank worries about a slowing economy and expected inflation to come down. BOE Governor Bailey's comments after the meeting were seen leaving the door open for further hikes if inflation remains strong. If GBPUSD maintains $1.22 as support, the next resistance is expected at $1.2310, whereas support can be seen around $1.21 if $1.2168 gives way.

The Eurozone reported negative growth in its advance Q3 GDP reading, dragged down by Germany, which is at risk of falling into a technical recession. Meanwhile, advance CPI change for the Eurozone fell to the lowest level since July 2021. Bulls are yet to recapture $1.07, with a rising risk of drops towards $1.0561 and the $1.05 round support. Conversely, removing the barrier could pave the way to $ 1.0750.

Crude prices initially fell over 5% in the week, aided by reading tensions in the Middle East and rumours of SPR releases in the US, but the price climbed back up later in the week ahead of the OPEC+ meeting. It managed to stay above the $80/bbl as Saudi Arabia and Russia are expected to confirm their current production curbs but still closed the week in the red. $85/bbl is a higher level to keep an eye on.

Biggest Market Movers

• US equities had a strong week, with the Nasdaq gaining despite disappointing results from Apple and the S&P 500 popping the most since April in the wake of the Fed's rate pause.
• The USDJPY completely reversed the yen strength from the BOJ decision, rising as high as 151.80 before declining later in the week.
• The pound had a volatile week but ended higher following the BOE's "hawkish pause".
• Gold fell back below the $2,000 handle as the initial concern over Israel's incursion into Gaza eased with no further escalation during the week.

Top Events in the Week Ahead

After a particularly active week on the monetary policy front, the coming week is relatively calm regarding central bank activity, with just the RBA expected to meet and hold rates unchanged. Trade data from the US and China will likely dominate early in the week. 

Tover of Trade Data Across the Board

The US is likely to see a slight expansion in its trade deficit as imports and exports are projected to rise. However, the stronger dollar is likely seen as contributing to Americans buying more products overseas. In contrast, China is expected to see its trade surplus expand again, thanks to a drop in exports and imports in a general trend of slowing trade worldwide. USDCNH may break outside the narrow range of 7.30-7.35.

Canada will also report its trade balance, with an increasing surplus thanks to higher crude prices. Loonies failed to reclaim 1.39, opening the door to 1.3637. 

Finally, the UK will report its trade balance, with the consensus being that the deficit has expanded.

UK Data Barrage with GDP in Focus

As is usual, the UK will release a bunch of data all at once, this time on Friday. The point likely to get the most attention is the Q3 GDP figure, which is anticipated to show that the UK economy was unchanged for the three months, slowing the pace from 0.2% reported in the second quarter. On an annual basis, the UK's economy is expected to have shrunk by 0.6%, compared to the 0.6% growth reported previously. The monthly GDP for September is forecasted to be positive at 0.1%. Manufacturing production is also projected to grow at an annual rate of 3.0%, faster than the 2.8% reported previously. Footsie's 3% rise could continue towards 7615 unless 7275 succumbs to potential pressure.

Other Events, Earnings

Monday has Canada's Ivey PMI. UK Halifax House prices are to be published on Tuesday. Wednesday sees Japan's Tankan index as well as final inflation figures from Germany. For Thursday, Chinese PPI and Inflation are expected. On Friday, Chinese new loans and the University of Michigan Consumer Sentiment Index are scheduled for release too. 

Earnings season will be moving past its peak, but many names are still yet to report, including Ryanair, Gilead, Uber, Walt Disney, Biogen, AstraZeneca, Becton Dickenson, and Polestar.