Weekly Trading Update
Week of November 14
Divergence was apparent this week. Bitcoin and the rest of crypto crashed alongside the demise of the FTX, while gold surged and stocks had their single best day gains in 2 years. The delayed UK budget and the G20 are on tap this week
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The week in review
- Markets shot higher amidst an unexpectedly big drop in US inflation that came in below even the lowest of estimates. Following the release, the odds of the Fed raising rates by just 25bps at the next meeting jumped, with the overwhelming majority of economists supporting that option. Gold surged nearly 3% on a weaker dollar, with eyes on price action around $1800/oz.
- Inflation figures came after the midterm elections, which produced a relatively muted response from the markets, as the results were largely within expectations. Republicans took control of the House, and the balance of power in the Senate is expected to be by the bare minimum. Stocks rose, with the DJIA leading the way to new highs, especially if it breaks the 34,300 resistance.
- China doubled down on its zero-covid policy, officially denying rumours that restrictions would ease. Nonetheless, the Hang Seng continued to pump, adding another 8% to its gain for a total of ~20% over the past two weeks.
- COP27 happened with no major announcements.
- Russia announced it was withdrawing from the regional capital of the Dnieper River, abandoning Kherson, one of the territories it had annexed in a "referendum" earlier in the year.
- The European Commission issued proposals for a tiered system for countries with higher debt but found immediate resistance from Germany. EUR/USD has a ceiling at $1.04 should the ~3% rally continue next week, with parity being the floor.
TOP EVENTS IN The week ahead
UK Budget Details
Focus will return to the UK with Thursday's Autumn Budget presentation on the back of the catastrophic ‘mini-budget’ that resulted in Lizz Truss resigning as Prime Minister.
Chancellor Hunt is expected to make a formal statement in Parliament. After the disaster of the last presentation, it's likely to get extra scrutiny this time around, when the government is expected to try to balance the books through spending cuts and tax hikes.
Before that, the UK will release its employment figures, which are expected to show a one-decimal uptick in the unemployment rate to 3.6%. Friday sees the release of retail sales figures for October, which are expected to show another decline.
GBP/USD rose 3% over the week, with most gains owed to a weaker dollar. $1.20 and $1.2275 return on the radar, whereas a sudden drop opens the door to $1.14 and $1.1150.
Inflation Figures
On Wednesday, the UK is expected to announce that inflation accelerated to 10.4% from 10.1% in September, as the monthly inflation rate sped up. Other countries will report CPI change figures as well.
In Canada, inflation is expected to come down once again. After the surprise reading in the US, traders might expect another surprise to the downside, given Canada's close trade relations. USD/CAD dropped to $1.33 with $1.32 and the round $1.30 next major support levels to keep an eye on. If $1.34 is recaptured, the chances of finding a local top at $1.36 will increase.
On Friday, Japan is expected to report inflation ticking up to 3.2% from 3.0% prior. The 140 level remains key for USD/JPY.
G20
The much-anticipated G20 meeting in Bali, Indonesia, kicks off on Tuesday. It's already been reported that Russian President Putin will not attend in person. But there is quite a bit of expectation that Biden could meet China’s Xi face-to-face on the sidelines of the event.
Other events
On Tuesday, Japan releases its preliminary Q3 GDP figures, China announces October industrial production, and the US reports October's PPI. On Wednesday, Australia reports its quarterly wage price index, and the US discloses retail sales data. Thursday has Japan's trade balance, the Australian unemployment rate and US housing starts.
Earnings
Notable earnings include Tyson Foods, Walmart, Home Depot, NVIDIA, Tencent, Alibaba and JD.com
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