Week of OCTOBER 21st

Last week, the key area of focus for markets was the ECB interest rate decision and data from China, which included the highly anticipated Q3 GDP figures.

The coming week is expected to be relatively quiet. The BOC is expected to reduce interest rates and release US durable goods orders data, allowing markets to focus on earnings.

Week in Review

As widely expected, The ECB cut its interest rates by 25 basis points. The accompanying statement reiterated guidance, saying inflation is expected to rebound before subsiding to the target level sometime in 2025. However, ECB President Christine Lagarde said there is more downside than upside risk to inflation. EURUSD dropped to an 11-week low near 1.08 as a result, as Euro Area inflation undershot expectations just hours before the policy announcement.

China's trade surplus came in less than anticipated, as both imports and exports grew at a slower rate than forecast. Investors had hoped for more details from an anticipated Ministry of Finance (MOF) press conference in China. However, they once again did not receive the expected level of information, leading to equities and commodities dropping in the latter half of the week.

China's Q3 GDP growth grew 4.6% over the last year compared to the expected 4.5% but was below the government's 5.0% target. Shortly after the figures, the PBOC announced several stimulus measures, confirming plans to cut bank reserve requirement ratios (RRR) and launch a facility to support brokerages' stock holdings. The move reversed earlier losses.

US retail sales for September grew by 0.4% compared to the forecasted 0.3%. This was part of a trend of US data exceeding economists' forecasts during the week. Major US banks reported earnings above expectations, providing optimism that the earnings season would generate strong earnings and bolster equity markets.

UK jobs numbers came in stronger than anticipated, with the unemployment rate ticking down to 4.05% from 4.1%. However, inflation fell below the 2% target to a multi-year low of 1.7%. The core inflation rate also dropped to 3.2% from 3.6%. UK's Footsie spiked to a 6-week high, marking resistance at 8400.

Canadian inflation missed expectations of staying at the 2% target rate, dropping to 1.6%. USDCAD managed a 3-week winning streak but started to lose momentum at 1.38.

Japan's inflation also underperformed at 2.5%, below the forecasted 2.7%. However, the "core-core" inflation rate ticked up to 2.1% from 2%.​ USDJPY maintains a position under the 200-week MA around the 150.00 handle.

Biggest Market Movers

• The Dow Jones rose 1.30% to a new record high of 44400 following upbeat earning reports driven by banks, marking a 6-week streak.
• Crude oil fell around 7% after rumours that Israel would not attack Iranian oil infrastructure and OPEC reducing its demand forecast.
• Gold soared 2.50% to new records following dovish sentiment from central banks after the ECB hinted at more cuts and uncertainty around the US elections.

Top Events in the Week Ahead

The upcoming week is expected to witness a slow start to economic releases, with the noteworthy policy decision being the BOC's interest rate event on Wednesday.

BOC Expected to Cut Rates

Analysts generally agree that the Canadian central bank is pursuing an accelerated easing course compared to the Fed. Recent data showed that inflation decreased below the target faster than anticipated, yet employment remained strong. Markets are pricing approximately 75% chance of a 50 basis point reduction by the BOC, with a minority anticipating simply a 25 basis point change. This establishes a situation where the Canadian dollar may experience some instability surrounding the decision.​ 1.3870 and 1.3650 are levels to keep an eye on.

Economic Indicators Update

Several important economic indicators will be released next week.

In the US, durable goods orders for the latest month will be released, often providing insight into business investment and confidence in future economic growth. Analysts expect to see a significant month-on-month rise in orders placed.

Earlier in the week, preliminary PMIs will be released for several countries and regions globally. The German composite PMI in Europe is projected to remain in contraction territory. However, the French services PMI may return to expansion. Even so, it is thought unlikely the composite French PMI will grow enough to surpass 50. The latest UK composite PMIs are also expected, with respectable but modest growth anticipated versus other parts of Europe. Overall, the data this week should offer further signals regarding both challenges and opportunities in the worldwide economy.​

Other Events and Earnings

The week will include several important economic announcements and earnings reports.

On Monday, China will release its loan prime rate figures. On Tuesday, data from the US Redbook report will be released. Eurozone consumer confidence figures are scheduled for Wednesday. The UK's CBI industrial trends orders report will be published on Thursday. Germany's Ifo business climate survey is expected on Friday.

Nearly half of major companies will announce quarterly earnings this week, before the weekend. Some of those reporting include SAP, Nucor, General Electric, Verizon, Danaher, Tesla, Coca-Cola, Lloyds Banking Group, Amazon, Union Pacific, Honeywell, Sanofi, Colgate-Palmolive and NatWest Group.​