After the CPI was released this week, many Federal Reserve officials reiterated their support for "gradual" interest rate cuts, and there were even calls for skipping the November rate cut. Fortunately, the US PPI for September released on Friday was flat month-on-month, showing that inflation has further cooled, easing the anxiety caused by Thursday's CPI and still supporting the Fed's interest rate cut next month.
In addition, Wall Street earnings season got off to a strong start, with major banks posting solid results and rising share prices. U.S. stocks followed suit to hit record highs. The S&P 500 index broke through 5,800 points, setting its 45th record since 2024, and rose for the fifth consecutive week, the longest rise since May.
Amid expectations of a slowdown in the pace of rate cuts, the Bloomberg U.S. Bond Index fell for a fourth straight week, with the 10-year Treasury yield rising more than 12 basis points this week and the dollar index rising for a second straight week.
Affected by the increasing tensions in the Middle East, U.S. oil prices rose 1.6% for the week and Brent oil prices rose 1.3% for the week, both rising for two consecutive weeks.
As PPI data re-supported expectations of rate cuts, spot gold rose more than 1% on Friday, further approaching its all-time high, and turned slightly higher for the week, while silver fell about 2% for the week.
The following are the key points that the market will focus on in the new week (all in Beijing time):
Central Bank News: Uncertainty of Fed rate cuts increases, ECB expected to cut rates next week
Fed:
At 03:00 on Tuesday, Fed Governor Waller will give a speech on the economic outlook
At 23:30 on Tuesday, 2024 FOMC voting member and San Francisco Fed President Daly will speak and participate in a dialogue at an event hosted by the New York University Stern School of Business.
Fed Governor Kugler delivered a speech at 01:05 on Wednesday
At 23:00 on Thursday, Goolsbee, 2025 FOMC voting member and president of the Chicago Fed, delivered a welcome speech at an annual meeting.
At 22:00 on Friday, Kashkari, 2026 FOMC voting member and President of the Minneapolis Fed, will deliver a speech
This week, Fed officials such as Williams, Goolsbee and Barkin suggested that they believe that the September CPI is a negligible inflation data, and Bostic said in an interview that he would consider not cutting interest rates in one of the two remaining meetings this year. However, the market still seems to be quite confident that the Fed will cut interest rates by 25 basis points as usual at its meeting next month, but the Fed will not be as aggressive as previously thought. You can continue to pay attention to the views of Waller, Kugler and others next week.
The question for gold now is at what pace the Fed will ease policy following higher-than-expected inflation and a slowing labor market. Geopolitical tensions, central bank buying and the US election are expected to continue to add to gold's upward momentum until the end of the year. While pricing in a Fed rate cut has changed in recent days and USD/rates are moving higher, it has barely touched gold's armor. Safe haven buying amid the situation in the Middle East could offset all of this.
Other central banks:
At 16:30 on Wednesday, the Bank of Japan held a "market operations meeting" to discuss the latest developments in the financial markets and the central bank's market operations.
At 20:15 on Thursday, the ECB announced its interest rate decision; at 20:45, ECB President Lagarde held a monetary policy press conference
Analysts at Deutsche Bank Research said the ECB is widely expected to cut interest rates next Thursday, which would be the first back-to-back rate cuts of the cycle and would therefore "mark the start of a faster easing cycle". However, the analysts said high macroeconomic uncertainty meant the ECB was unlikely to change its data-dependent, meeting-by-meeting approach to policy making. They expect a 25 basis point rate cut next week, followed by further cuts until the rate is reduced to 2.25% in April.
The European Central Bank will accelerate the pace of interest rate cuts in the coming months to boost the economy - reducing borrowing costs to a level that no longer constrains demand by the end of 2025, according to a Bloomberg survey.
Danske Bank believes that weakening supportive spreads, unstable risk sentiment, geopolitical tensions and tail risks of the US election indicate that the euro may continue to be under pressure against the US dollar in the short term. The current divergence in economic activity - a stronger US economy and a weaker eurozone economy are putting pressure on Europe and the United States. This trend, coupled with the current factors that favor the US dollar, supports the view that Europe and the United States will fall in the coming year, with a 12-month target price of 1.07 for Europe and the United States.
JPMorgan also said it would continue to short the euro, but if sentiment in the Asian market rebounds, the euro and the US dollar may approach the 1.10 level again. However, the bank still believes that the euro and the US dollar will slide towards 1.08 during the election.
Important data: Is the dollar back? Gold still needs to be wary of major changes in technical prospects
Monday 23:00, US New York Fed 1-year inflation forecast for September
On Monday, OPEC released its monthly crude oil market report (the specific release time of the monthly report is to be determined, usually around 18:00-21:00 Beijing time)
Tuesday 14:00, UK August three-month ILO unemployment rate, UK September unemployment rate, UK September unemployment benefit applicants
At 16:00 on Tuesday, the IEA released its monthly crude oil market report
At 17:00 on Tuesday, the German/Eurozone October ZEW economic sentiment index and the Eurozone August industrial output monthly rate
At 20:30 on Tuesday, Canada's September CPI monthly rate, Canada's August wholesale sales monthly rate, and the US New York Fed manufacturing index in October
At 14:00 on Wednesday, the UK September CPI monthly rate and the UK September Retail Price Index monthly rate
At 20:30 on Wednesday, the monthly rate of the US import price index in September
At 17:00 on Thursday, the final value of the euro area's September CPI annual rate, the euro area's September CPI monthly rate, and the euro area's August seasonally adjusted trade account
At 20:30 on Thursday, the number of initial jobless claims in the United States for the week ending October 12, the monthly rate of retail sales in September, and the Philadelphia Fed manufacturing index in October
At 07:30 on Friday, Japan's September core CPI annual rate
At 10:00 on Friday, China's third quarter GDP annual rate, China's total retail sales of consumer goods in September year-on-year, China's industrial added value above designated size in September year-on-year
At 14:00 on Friday, the UK's September seasonally adjusted retail sales monthly rate
There is a lack of important US economic data in the first half of next week, and the market will have to wait until next Thursday to get the US retail sales data for September. The market's reaction may be simple. Data that is unexpectedly higher than expected will support the US dollar, and vice versa. CFTC data showed that as of October 8, speculative market participants including hedge funds, asset management companies and other institutions cut their bets on a weaker US dollar from $13.6 billion in the previous week to about $9.4 billion. Geopolitical risks brought about by the conflict in the Middle East have also driven demand for other safe-haven currencies such as the US dollar and the Swiss franc. The US dollar has risen by more than 2% in less than two weeks in October. Foreign exchange experts at Credit Agricole revealed that recent meetings with clients showed that the rise of the US dollar so far in October has made foreign exchange investors wonder whether it represents the return of the title of "King of the Dollar".
With the upcoming U.S. election just weeks away, the premium paid to hedge against a dollar appreciation against a basket of currencies over the next month has risen to near its highest level since July last year. JPMorgan strategists including Patrick Locke wrote in a report this week that the dollar is "too calm" as it has not yet shown a significant risk premium associated with the U.S. election, given poll indicators and tariff policy risks.
But the data itself is unlikely to have a strong impact to change the direction of gold. In the meantime, the gold market will pay close attention to Asian economic data and developments in the geopolitical situation.
Analyst Eren Sengezer believes that technically, the daily RSI of spot gold fell to 50 at the beginning of this week and then returned to 60, indicating that the bullish tendency of gold remains unchanged after technical adjustments. On the upside, gold is concerned about the midpoint of the upward channel since June and the horizontal resistance of $2,660, as well as the resistance of the upper edge of the upward channel of $2,700-2,710. However, if spot gold falls below $2,590-2,600, the lower edge of the upward channel, and turns this back into a resistance level, it may attract technical shorts to enter the market. In this case, $2,535-2,545 (50-day moving average and 38.2% Fibonacci retracement level) can be regarded as the next bearish target.
Important events: The Middle East crisis is stalemate, and oil market investors are on pins and needles
According to the Washington Post, an Israeli official said that Israel's attack on Iran is still being planned and that the postponement of the Israeli Security Cabinet's action was made in continued consultation with the Biden administration. The official said the Security Cabinet could be called to vote at any time by telephone.
The oil market is currently being pulled by two forces. On the one hand, supply-side risks driven by geopolitics in the Middle East are supporting oil prices. On the other hand, concerns about the tepid spot market may drag prices down.
Hedge funds fled bets against Brent crude prices at the fastest pace in nearly eight years as the risk of war grew. Data from ICE Futures Europe showed that fund managers cut their short Brent crude positions by 47,977 lots to 91,222 lots, the biggest drop since December 2016. Israel has not yet decided how to retaliate against Iran's missile attack last week, according to an official familiar with the matter. Although U.S. President Biden has advised against attacking Iranian energy facilities, the possibility has made investors uneasy and cautious about betting on futures prices.
Overall, speculators increased their long positions in Brent and WTI by 117,227 contracts to 263,135, according to data from the Intercontinental Exchange and the Commodity Futures Trading Commission on four futures and options contracts. That was the most bullish in 10 weeks.
In addition to geopolitical risks, investors are concerned about supply disruptions from Hurricane Milton in the United States and are optimistic that China's massive stimulus measures will drive a lasting recovery in the world's second-largest economy and boost fuel demand in the world's largest oil importer.
Company financial report:
The Q3 earnings season for U.S. stocks is here, and heavyweight stocks such as Goldman Sachs (GS.N), Citigroup (C.N), Morgan Stanley (MS.N), TSMC (TSM.N), Netflix (NFLX.O), and Johnson & Johnson (JNJ.N) will release their results next week.
“We expect a solid earnings season, including for the big banks,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management in New York. “Credit card delinquencies remain low and increased economic activity should drive bank revenues.”
“Now that the Fed has begun a rate-cutting cycle, the economy should get an additional boost from rate cuts on things like credit card debt and business loans,” said David Lefkowitz of UBS Global Wealth Management. “As a result, we expect third-quarter results to be consistent with recent healthy trends.”
Holiday arrangements:
On Monday (October 14), Japan-Tokyo Stock Exchange was closed for one day due to sports day.
On Monday (October 14), the Toronto Stock Exchange in Canada was closed for Thanksgiving.
Article forwarded from: Jinshi Data
