Week of October 3

After a calamitous end to September with GBP/USD hitting a record low and talk of a narrowly averted pension crisis, UK markets will aim to start the fourth quarter on firming footing.

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The week in review

• The BOE stepped in to buy bonds at the end of the curve after the market reacted negatively to the Chancellor's "mini-budget" announced the prior week. But the UK's Q2 GDP was revised higher to come in positive. Cable fell to record lows near $1.035 but has recovered nearly all losses.
• Stocks fell through the final week of the quarter, with the Nasdaq unwinding the bear market rally from the summer to hit new lows for the year, not long after the SPX 500 and DJIA did the same. It means three-quarters of negative performance in the stock market.
• Brent dipped to $84/bbl, the lowest since the start of the war in Ukraine. It then moved to $90/bbl after large leaks were detected in the Nord Stream pipelines, which are widely believed to have been caused by sabotage following reports of explosions in the area.
• A series of central bank speakers on both sides of the Atlantic doubled down on the intention to raise rates as long as necessary to bring inflation to heel, seemingly weighing on the US dollar, which supported equities at the backend of the week.
• Russia held referendums in occupied parts of Ukraine, with President Putin announcing an "accession treaty" signing instead of outright integration into Russian territory. The process will proceed next week, with the Duma expected to approve the move on Tuesday.

The week ahead

London waits for "mini-budget" details

The UK Tories hold its annual conference, where the Chancellor is expected to provide further details about his "mini-budget" that crashed the pound and send gilt yields spiking. The BOE has plastered over the hole for now but without major changes to fiscal policy, UK assets could again be at risk.

Chinese away while Yuan at record lows

China is out for holiday the whole week. USD/CNY reached a financial crisis high at 7.25, where it met stiff resistance. A shooting star candlestick pattern can be observed on the charts, with the round support at 7.00 supporting the thesis of further downside.

Global PMIs in the spotlight

Other markets have an avalanche of data to deal with, starting Monday with the release of global PMIs, which could set market sentiment going forward. European figures are expected to confirm the disappointing preliminary results, while US ISM Manufacturing PMI is forecast to remain essentially flat. EUR/USD found a temporary bottom at $0.9670 and heads up to parity. Its break or firmness will determine short-term price action.

Another potentially market-moving event is a further meeting of EU economy ministers attempting to agree on a "dynamic cap" on Russian gas imports.

NFP: Job growth to slow?

Then focus shifts to Friday's release of NFP, where job creation is expected to be less than last month at a quarter of a million new hires. The unemployment rate is expected to remain steady at 3.7%. Looking at USD/JPY, 146.00 remains a level of defence, with 142.50 being a potential support level.

Commodity focus

The RBA is expected to hike rates by another 50bps on Tuesday, after another round of disappointing housing data. Then on Thursday, Australia reports its trade balance, which is expected to see another expansion. The RBA also publishes its financial stability review. AUD/USD reached a May '20 low at $0.6400, forming local support.

The RBNZ holds its Monetary Policy Review. Kiwi hit a March '20 low instead at $0.5620.

Canada reports Ivey PMI and employment data, with the unemployment rate expected to tick down one decimal. Loonie moves along Aussie's line, but structurally speaking the false-break at 1.3830 shows early signs of reversal. 1.3600 is local support.

Other data and earnings

Tuesday sees US JOLTs Job Openings. Wednesday has US, Canadian and German Balance of Trade. Friday has UK Halifax house prices.

The earnings calendar is light, but Tesco, Diageo and Imperial Brands are all scheduled to report earnings.

The International Automotive Industry Conference in Germany takes place throughout the week.