Week of OCTOBER 28th

Last week saw limited data developments as the market looked ahead to the BOC meeting before US durable goods figures.

More data will be released this week near the end of the month, including flash Eurozone CPI and GDP and US GDP, the BOJ's rate decision, and Non-Farm Payrolls.​ Meanwhile, the UK government will deliver its first Budget.

Week in Review

The BOC cut interest rates by 50 basis points as widely expected, reiterating that future policy moves would be data-dependent. Risks to inflation were seen as "balanced," with slower spending as the largest downside risk to CPI. The central bank also stated that it expected GDP growth to resume in the first quarter of the following year. USDCAD rose for the 4th week in a row, eyeing the 1.39 handle to the upside unless bulls lose 1.38.

Many ECB speakers made headlines throughout the week, highlighting the opinion gap between more hawkish and dovish members. ECB President Christine Lagarde spoke publicly for the first time since its last interest rate cut, emphasising that inflation is on track to be under control by next year and that the pace of future reductions would be determined later. EURUSD witnessed its 4th consecutive week of losses below 1.08, but this appears to form support, bringing into focus the 50-week moving average of 1.0880.

Germany's preliminary manufacturing PMI for October beat market forecasts, though activity remained mired in contraction, which is seen as providing some resurgence in risk appetite across Europe.

In geopolitics, markets interpreted the latest opinion polling as indicating that US presidential candidate Donald Trump held a marginal lead. This led to a resurgence of the "Trump trade," with a stronger dollar, cryptocurrencies, and higher bond yields. The US index rose to a 3-month high above 104 during the week.

In the Middle East, reports emerged during the week outlining that Israel had finalised preparations for retaliation against Iran, with an attack considered "imminent." Meanwhile, talks around a ceasefire might commence over the weekend, trimming some of the gains seen earlier in the week.

Russia hosted the BRICS summit in Kazan, calling for a new commodities-backed global currency to replace the dollar, euro, and other G7 currencies.

Biggest Market Movers

• Gold rose 1.50% in the first half of the week as investors sought safe havens but retreated as yields rose closer to the end of the week.
• The euro fell nearly 1% through the week following reports that ECB members debated the neutral level but a less dovish sentiment surfaced at an IMF-World Bank meeting, supporting prices marginally.
• The dollar strengthened over 2.50% against the yen above 153 yen but fell back below 152 as Japanese authorities verbally intervened.
• Heightened tensions in the Middle East supported the price of crude oil, with Brent advancing nearly 5% and above $75 per barrel in the second half of the week but later retracing around half the gains on improving rhetoric of a ceasefire.​

Top Events in the Week Ahead

This coming week, a wealth of important economic data will be published in the US as the Fed enters a blackout period ahead of its next policy meeting. The data with the biggest chance of moving markets will be the non-farm payrolls (NFP) report.

NFP to Overshadow Other US Data

Employment numbers in the US are expected to decline to 180,000 from the unusually high results in September, with the unemployment rate rising modestly to 4.2%. The data will come on the heels of the release of the Fed's preferred inflation measure, projected to remain stable at 2.7%, and the advance reading of Q3 GDP growth, forecast to accelerate to an annualised rate of 3.3% from 3.0%. Given issues with government debt and a lack of agreement in Congress on spending, Monday's Treasury refinancing announcement may also garner some attention. Gold has resistance at $2800 per ounce if prices re-accelerate to record highs, whereas support remains at $2650.

On the subject of economic growth, China will publish its official manufacturing and services PMI figures for October this week. The data will be closely watched as they are the first to include the period after China's stimulus announcements in September.​ Europe's Euro Stoxx 50 index may react, offering directional clues as it has traded around the 5000 handle in recent weeks. Support appears near 4800 and resistance above 5080 at the record high of 5120.

Key European Figures Remain Subdued

This week sees a public holiday in many European countries on Friday, although stock markets will generally operate normally. Economic data releases are focused on the middle of the week, with preliminary inflation figures for October anticipated to show headline rates still below target while underlying inflation persists above goals. The Eurozone's growth is projected to inch higher to 0.3% for the most recent quarter, up from 0.2%, helped by Germany potentially growing 0.2% after contracting 0.1% previously - allowing it to avoid a technical recession of two back-to-back contractions.​

UK Budget: Taxation and Public Spending

On Wednesday, UK Chancellor of the Exchequer Rachel Reeves will present the first annual Budget put forward by the Labour Party in over ten years. Markets are considering potential changes to taxation that may affect trading, including an increase in capital gains tax. Other aspects under review are whether to retain or remove the recent reduction to National Insurance contributions. The Chancellor is also expected to announce measures to boost public investment. However, in light of the economic disruption caused by the fiscal announcements in 2022, the degree of reforms implemented could be moderate.​

BOJ Expected to Maintain Its Position

With the Japanese yen weakening ahead of the parliamentary elections this weekend, some attention has been paid to the BOJ's meeting on Thursday. Markets are expecting another interest rate hike in December, so Governor Kazuo Ueda may provide some indication that this could help strengthen the yen. However, this may depend on whether Prime Minister Shigeru Ishiba's Liberal Democratic Party receives enough votes to govern alone or needs to form a coalition government, with the latter being viewed as less favourable for the yen.​ Resistance above 154.50 sits at 156.50, while support lies at the 150 round support.

Other Events and Earnings

On Monday, the Dallas Fed will release its manufacturing index for Texas. Tuesday will see data from Germany on consumer confidence as measured by GfK. Wednesday will show inflation statistics for Australia as well as a separate report on consumer confidence in Japan. Retail sales for Japan and GDP for Canada are expected on Thursday. Friday will deliver figures on housing prices from the Nationwide Building Society in the UK along with the ISM manufacturing PMI for the United States.

Throughout the week, many public companies will announce their latest financial earnings. Some of the largest firms reporting include Alphabet, Visa, AMD, Novartis, Microsoft, Meta, Caterpillar, Apple, Amazon, MasterCard, Linde, Shell, Welltower, Exxon, Chevron and Berkshire Hathaway.​