Week of October 10

US banking giants kick off third-quarter earnings season as global equities looks to sustain a nascent relief rally. US inflation data will be the headline event for forex markets.

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The week in review

• Markets surged higher on the first trading day of the fourth quarter in the best performance in two years, leading to speculation of another bear market rally.

• Media reports cited rumours that the Fed might pivot sooner than expected, though the timing could also suggest a technical correction. Optimism faded through the week as attention turned to employment data, and a series of Fed speakers affirmed a strong hawkish tone.

• OPEC+ cut its production targets by 2M bbl/d on Wednesday, angering the White House as it came just before the crucial mid-term elections. There had already been a plan to release 10M bbl from the SPR in November, but the Administration suggested more measures could be taken. The announcement found WTI trading at $85/bbl with bulls eying triple digits again.

• The RBA hiked by less than expected, citing the chaos in the UK financial markets in the wake of the mini-budget. Aussie traded to more than 2yr lows of 0.6390.

• The UK Chancellor affirmed that the final details of the spending plan won't be published until late November. Cable (GBP/USD) peaked at 1.1500 with the door to 1.1750 open, but it pivoted around 1.1200. 1.1000 is round support in the week ahead.

The week ahead

CPI data from the world's largest Economies

The focus is likely to be on the latest inflation figures from the two largest economies in the world.

US CPI figures are expected to repeat last month's trend of slowing headline inflation but continue rising core inflation – out on Thursday. That scenario will likely continue to justify Fed tightening as its preferred inflation measure is more than triple the target rate. USD/JPY is near intervention levels, near the critical resistance at 145.00.
China returns from a week-long holiday, with its stock markets expected to move significantly to catch up to events. China's inflation will likely show an acceleration on Friday, while the PBOC is still on an easing trajectory. China producer prices, however, are expected to decelerate.

Consumer data is also in focus

The US will also release retail sales at the end of the week. The data is expected to show a decline in buying, both on the headline number and when excluding gas and autos. This could leave investors more worried about demand destruction as borrowing costs increase. However, Michigan consumer sentiment comes out on the same day, which is expected to show a minor increase.

The UK also publishes retail sales, expected to increase, and Australia is expected to report a drop in consumer confidence on Tuesday.

Q3 Earnings season

Friday marks the unofficial start of the Q3 earnings season with reports from major US banks, Citigroup, JPMorgan, Morgan Stanley, and Wells Fargo. Other earnings of note include ING, Repsol's quarterly production figures, Givaudan, Pepsico and United Health.

Other events

On Tuesday, the UK publishes the claimant count and August unemployment rate. Wednesday sees UK August rolling 3-month GDP and trade balance while the Fed releases minutes from the latest meeting across the ocean. Thursday has the IEA oil market report. On Friday, China announces its trade balance.