Week of October 20

Last week's economic calendar was light after key data was delayed by the US government shutdown, with highlights including China's trade balance and UK monthly GDP.

The week ahead sees a busy economic calendar with headline events including the US and UK September CPI, China Q3 GDP, and flash PMIs.

Week in review

US news once again proved influential on markets last week, with traders keeping an eye on the shutdown and a re-escalation in the US-China trade war. But trouble in regional banks on Thursday sent markets lower as traders sought safe havens as the earnings season got started.

Data from the UK presented a mixed picture, with the unemployment rate rising to 4.8%, above a forecast to remain unchanged at 4.7%. However, the number of newly created jobs exceeded expectations. Later in the week, August GDP rose to 0.1%, as was expected. But the prior month's reading was lowered to -0.1% from 0.0%. UK equities underperformed amid reports that Chancellor Rachel Reeves was looking at a combination of tax hikes and spending cuts to leave a larger margin in next year's Budget.

What would otherwise have been the main event of the week, US CPI figures, was delayed until the 24th due to the government shutdown. Despite attempts to break the political impasse on spending, successive votes produced no results. Reports indicated that Republicans were willing to increase health care spending — a crucial issue Democrats had demanded. US President Donald Trump signed an executive order to fund military pay, one of the potentially more sensitive issues around the shutdown.

China's trade surplus was lower than expected, but that was largely due to a much larger-than-anticipated surge in imports relative to exports. Goods shipped to China last month rose 7.4% over the 3.5% forecast, while exports increased 8.3% instead of the 5.2% predicted.

In geopolitics, French President Emmanuel Macron reappointed Sebastien Lecornu as Prime Minister, who then faced an immediate vote of no confidence. However, he managed to survive after offering significant concessions to the Socialist wing of the National Assembly. Trump hosted his Ukrainian counterpart, Volodymyr Zelenskyy, before heading to Hungary for a meeting with Russian President Vladimir Putin, amid attempts to restart negotiations to end the war in Ukraine. After Trump downplayed the threat of 100% additional tariffs on China, markets initially rallied. However, the introduction of new sanctions and fees between the world's two largest economies caused market anxiety, despite US Treasury Secretary Scott Bessent spending several days in Beijing for trade talks.

Biggest Market Movers

• Gold rises for the ninth week in a row with the biggest weekly gains since 2020 amid haven flows.
• The Swiss franc is the best-performing major currency, supported by gold prices and safe-haven demand.
• Crude prices trended lower amid progress in the Gaza ceasefire, rising production, and the IEA report of a potential supply glut.

Top Events in the Week Ahead

The central theme of the coming week is likely to be inflation, as the US, UK, Japan, and Canada all publish their latest consumer price indices. Geopolitics could play a key role ahead of the APEC summit, where Trump is expected to meet Xi for trade talks. Markets will also be looking for any progress in resolving the US government shutdown.

Inflation Keeps Central Banks On Track

Ahead of the next central bank meeting cycle, traders will closely monitor several CPI releases to adjust expectations for monetary policy. First to report is Canada on Tuesday, where the BOC's preferred inflation measure, the trimmed mean, is expected to escape the 1-3% target range and rise to 3.1% from 3.0% prior. With USDCAD revisiting 1.4000 again, the next major resistance lies at 1.4150, while in the opposite direction, support sits at 1.3930.

UK inflation will be published on Wednesday and is expected to rise to 4.0% from 3.8% previously, preventing the BOE from easing amid the weakening labour market. Core inflation is seen rising to 3.7% from 3.6% a month ago. The data could support the recent bounce in cable, opening the door to 1.3600, but a disappointment could take the pair to a downward trip towards 1.3250.

Japan reports its CPI figures on Friday, with expectations that it will remain unchanged at 2.7%. Markets have pushed back expectations of a rate hike to next year amid ongoing political wrangling over who will become Japan's new Prime Minister. If CPI aligns with expectations or comes out cool, the yen could weaken further and revisit the peak of 153.30 against the buck. On the flip side, a hawkish inflation report could maintain the breakdown under 150.00 and expose 147.50.

Finally, the US will report its delayed September CPI reading on Friday, with the consensus pointing to a slight uptick to 3.0% from 2.9% previously. Meanwhile, the core rate is projected to come down to 3.0% from 3.1% a month earlier. Although the odds of rate cuts are unlikely to change much, gold prices could experience sharp moves in the case of a surprise. To the upside, traders might look at $4400 and $4500 per ounce, whereas on the flip side, supports remain at $4200 and $4110.

Flash PMIs and EU Growth

Friday also sees the release of flash PMIs for October, with the focus likely on Europe as the shared economy continues with its fragile recovery. The French composite PMI is projected to remain below 50 but to rise to 48.5 from 48.1 in September. Germany's manufacturing PMI is expected to decline to 49.0 from 49.5 previously. Meanwhile, in the UK, the composite PMI is expected to advance further into expansion territory, to 50.5 from 50.1 previously. Fibre failed to accelerate past 1.1700 on Friday, which might be tested once again. The next resistance lies at 1.1780 and subsequently the 1.1800 handle, while supports are seen at 1.1600 and 1.1542.

Slowing Chinese Growth Amid Tariffs

Despite better-than-expected trade data for the third quarter, China's GDP is expected to slow to an annual rate of 4.9% from 5.2% a quarter earlier. A disappointing reading could support the markets, however, as it might motivate the central government to announce further spending. Markets are still waiting for the PBOC to cut rates as a stimulus move.

Other Events and Earnings

Monday includes China's loan prime rate. Tuesday sees the Swiss trade balance. Japan's trade balance is expected on Wednesday. For Thursday, US existing home sales are scheduled. Friday has UK retail sales. Earnings season ramps up this week, with prominent names expected to report, such as Netflix, GE Aerospace, Philip Morris, Tesla, Thermo Fisher, Boston Scientific, IBM, Intel, Honeywell, Blackstone, Lloyds Bank, Procter & Gamble, Antofagasta, NatWest, and Barclays.