This week has seen some very tentative price action as markets digested the latest earnings from the US. In key focus has been supply chain problems and higher input costs via raw materials and labour increases. However, for the most part, major company earnings have held up pretty well. Inflation concerns remain an ongoing theme and markets are looking expectantly ahead to next week and to the central bank meetings. The Bank of Canada took a hawkish tilt this week and the Reserve Bank of Australia, Federal Reserve and the Bank of England are all meeting next week. Buckle up for a likely volatile week ahead.

Other key events from the past week

  • CAD: A hawkish shift, Oct 27: The BoC left rates on hold, but they ended QE and brought rate guidance forward to the middle quarter of 2022 from sometime in the second half of 2022. This move was supportive for the CAD and should continue to be over the medium term as long as oil prices don’t collapse.
  • ECB: Holding meeting, Oct 28: Christine Lagarde said inflation was still temporary and that the ECB’s analysis did not support market-based lift-off expectations of 20 bps by December 2022. However, the euro rallied sharply higher out of the meeting. All eyes are on the Fed now for next week and EURUSD direction.
  • AUD: Inflation rises, Oct 26: Australia’s inflation reading moved higher this week with the annual rate moving to 2.1% vs expectations of 1.8%. This caused a quick pop higher in the AUD as inflation fears continue to be a major concern for traders. However, will the RBA stick to no rate hikes until 2024 next week?

Key events for the coming week

  • USD: Interest Rate meeting, Nov 03: The expectations are that the Fed will announce tapering and the end of asset purchases around the middle of next year. Expect any deviation from that path to result in significant volatility for the USD.
  • Seasonal trades: Gold, Nov 01: Gold has risen 22 times in the last 53 years between November 01 and December 31. Will gold break higher again this year? Check out the strong seasonal pattern here.
  • GBP: Interest Rate meeting, Nov 04: Sonia futures have been pricing in a full four 25bps rate hikes by December next year. This has left many GBP traders sceptical about whether the BoE really will hike rates this quickly.

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