Week of October 27

Last week saw markets focusing on trade negotiations, while China's GDP missed and UK inflation was softer than anticipated, ahead of the delayed release of US CPI figures.

The week ahead has a jam-packed economic calendar with rate decisions from the Fed, ECB, BOJ, and BOC, as well as inflation and GDP numbers from the Euro Area.

Week in Review

The markets continued to contend with less data as the US government remained shut down.

Inflation in the UK came in softer than expected, unchanged from the prior month at 3.8% rather than rising to 4.0% as anticipated. Core inflation declined to 3.5% from 3.6% a month earlier amid softening housing prices. Markets moved to price in a 50-50 chance of a BOE rate cut before the end of the year. UK retail sales jumped 0.5%, unexpectedly well above the -0.1% expected.

Canadian inflation unexpectedly rose to 2.4% from 1.9%, higher than the 2.2% expected. The BOC's preferred measure, the trimmed mean, annual inflation ticked up to 3.1%, as anticipated, leaving markets a bit unsure whether the BOC would actually go through with the projected quarter-point rate cut.

China's Q3 GDP growth rate disappointed at 4.8%, below the 4.9% forecast and down from 4.5% in the prior quarter. However, the quarterly rate accelerated to 1.1% from 1.0% in the second quarter.

Japan's inflation rate came in as projected at 2.9%, with the core rate also at 2.9%.

In geopolitics, US President Donald Trump hinted that a trade deal with India was close, which would reduce tariffs on goods from the Asian nation to 15-16%.

In geopolitics, the White House sanctioned two Russian oil firms in a sign of cooling relations between Washington and Moscow. After extensive political negotiations, Sanae Takaishi was appointed Prime Minister of Japan, with a more dovish fiscal policy agenda.

Biggest Market Movers

• On Tuesday, gold posted its most significant 12-year drop amid progress in trade negotiations and profit-taking, plunging from Monday's record high.
• Crude prices rose despite supply glut warnings amid increasing tensions between the US and Russia and rumours that the US and India would stop buying Russian crude.
• The Japanese yen was the worst performer of the major currencies following the appointment of a more dovish Prime Minister.

Top Events in the Week Ahead

The ongoing US government shutdown is likely to disrupt major data releases in the coming week. Quarterly GDP, as well as the Fed's preferred inflation metric, the PCE Price Index, would otherwise have come out this week. US clocks move forward to end daylight saving time, causing a one-hour discrepancy in the usual data release schedule.

Major Central Bank Rate Decisions

All eyes will be on the Fed's rate decision on Wednesday, as it navigates monetary policy with limited official economic data. The odds of a 25 bps cut are over 97%, with the market expecting the Fed to signal further easing at the next meeting in December. If gold holds the $4k handle until Wednesday, resistance lies at $4190 and $4300, with a breakdown exposing $3950.

The ECB will meet on Thursday, with economists unanimous in expecting it to leave rates unchanged. However, with the faltering economy, traders will be on the lookout for signs that the central bank might be inclined to cut rates in the near future. With the eurodollar stuck around 1.1600, one side brings the 1.1545 swing into focus, while the other could open the door to 1.1700.

The BOJ will also meet on Thursday, with markets widely expecting no change in policy. However, there will be scrutiny of Governor Kazuo Ueda to see if there is a change in outlook after the election. With USDJPY near 2025 highs, this could be a make-or-break moment for the pair. On the one hand, resistance levels lie at 154.00 and 155.00, while on the other, supports under 153.00 can be seen at 152.00 and 151.50.

The consensus is for the BOC to cut rates, but a growing minority of analysts is suggesting a pause is possible after inflation rose in Canada. Such a surprise outcome could weigh on USDCAD and cause a selloff at the 1.4000 handle that prices have traded around for a couple of weeks. Major support lies at 1.3925, and resistance above 1.4080 at the 1.4100 round level.

Eurozone Data Remains Calm

The flash October reading of Eurozone inflation comes out on Friday and is expected to tick back to 2.1% from 2.2%. A day earlier, the Euro Area's first reading of Q3 GDP is expected to be unchanged at 0.1% quarterly growth. With Eurozone inflation near the ECB's target and potentially falling, there could be increasing pressure on the ECB to cut rates in the near future.

China's Economy Shows Signs of Recovery

The official October PMI measure for China comes out on Friday, with the non-manufacturing component expected to advance into expansion to 50.4 from 50.0 prior. China's manufacturing PMI is expected to return to expansion territory at 50.2, up from 49.8 a month ago.

Other Events and Earnings

Monday has the German Ifo business climate. The Conference Board publishes its US Consumer Confidence Survey on Tuesday. Wednesday includes the Australian CPI and Japanese consumer confidence. Thursday sees Eurozone industrial sentiment. For Friday, Japanese jobs data is expected.

Earnings season will peak this week, with the majority of the S&P 500 having reported by the end of Friday. Notable names scheduled to update investors include Visa, UnitedHealth, Novartis, Microsoft, Alphabet, Meta, Apple, Amazon, Eli Lilly, Exxon, Chevron, and Welltower.