Important calendar events
The dollar dipped last week, and the dollar index dropped from 104.5 to 104.3. On the other hand, US treasury yields gained strength with the US 10-year bond yield rising from 4.27 to 4.39%.
The week ahead is packed with high-impact news for Forex markets. The US Presidential and congressional elections on November 5th will attract considerable market attention. Trump’s proposed tariffs and tax policies will support economic growth, boosting the dollar. If, on the other hand, Kamala Harris wins, she might adopt a more moderate approach to fiscal policy, which will put pressure on the dollar. Currently, polls are showing that Trump and Harris are neck-in-neck. The implications of the election outcome, however, are complex and will likely cause volatility in the dollar price.
In addition, the US Federal Reserve will announce its interest rate decision on November 7th. The US Federal Reserve is expected to lower interest rates by 25 basis points this week. After the meeting, market participants will focus on Fed Chair Jerome Powell’s press conference for hints on the Fed’s rate outlook.
The Federal Reserve cut its benchmark interest rate by 50 basis points to a target range of 4.75% to 5.00% in September, after holding interest rates steady since last July. The Fed launched its easing cycle with an aggressive rate cut, signaling the end of its restrictive monetary policy. Fed Chair Jerome Powell stated that the central bank aims to strengthen the US economy and labor market.
On the data front, Non-Farm Payrolls (NFPs) fell short of expectations putting pressure on the dollar. NFPs provide estimates on the number of jobs created in the US and they are leading indicators of economic growth. Non-farm payrolls, which according to the Bureau of Labour statistics were affected by hurricanes, dipped to just 12K in October, against expectations of 106K. In addition, September’s print was revised downward to 223K. Average Hourly Earnings, on the other hand, rose by 0.4% against the 0.3% growth anticipated.
Core PCE Price Index, data on Thursday came in within expectations. Core PCE Price Index is the Federal Reserve’s preferred inflation gauge and may affect the Fed’s rate outlook. US core PCE rose by 0.3% in September, Annual core PCE inflation remained steady at 2.7% in September against the 2.6% anticipated. US Unemployment claims released on Thursday were more optimistic than anticipated, boosting the dollar. US Unemployment Claims dropped to 218K for the week to October 25, from 228K the week before and against expectations of 229K.
Advance GDP data released on Wednesday for the third quarter of the year were disappointing. The US economy expanded by only 2.8% in Q3 of 2024, after rising by 3.0% in the second quarter of the year and by 1.4% in the first quarter of the year. Markets were anticipating 3.0% growth in the third quarter of 2024 and a lower-than-expected print put pressure on the dollar. The US economy is suffering from prolonged tightening, raising recession concerns.
Strong US ADP Employment data on Wednesday, however, provided support for the dollar. ADP Non-Farm Employment Change rose to 233K in October, exceeding expectations of 110K, while September’s print was revised upward to 159K.
US inflation is proving to be sticky despite the Federal Reserve’s efforts to bring it down to its 2.0% target. Headline inflation cooled slightly to 2.4% in September from 2.5% in August against expectations of a drop to 2.3%. Monthly CPI rose by 0.3% in September, surpassing expectations of 0.2% growth. Annual core CPI, which excludes food and energy, rose to 3.3% in September from 3.2% in August. Monthly core CPI rose by 0.3% exceeding expectations of 0.2% growth.
EUR/USD rose from 1.079 to 1.088 last week as the dollar weakened. If the EUR/USD pair declines, it may find support at 1.076, while resistance may be encountered near 1.099.
The ECB lowered its benchmark interest rate by 25 basis points in October, bringing its main refinancing rate to 3.40%. The ECB started its easing cycle in June, lowering interest rates by 25bps for the third time this year in October.
ECB President Christine Lagarde has stated that the decision to cut interest rates was unanimous, but did not commit to future rate cuts. Lagarde stressed that economic activity in the Eurozone is slowing down inducing the ECB to lower interest rates. She also stated that policymakers are confident that inflation will drop to the central bank’s 2% target in 2025 but stressed that there are both upside and downside risks to inflation.
In an interview with the French newspaper Le Monde on Thursday, Lagarde appeared satisfied with the progress of disinflation in the Eurozone. Lagarde stated that the ECB’s 2% inflation goal is in sight but stressed that inflationary pressures are still not under control. ECB’s Joachim Nagel stated that price stability is not far off, while ECB policymaker Isabel Schnabel warned that rate cuts should be gradual.
Inflation data for some of the EU’s leading economies released on Wednesday showed that inflationary pressures in the Eurozone are not cooling as fast as expected. This was confirmed by CPI data on Thursday for the Eurozone as a whole. Eurozone inflation rose to 2.0% year-on-year in October from 1.7% in September, against expectations of 1.9%. Core CPI, which excludes food and energy, also came in higher than anticipated, remaining steady at 2.7% in October, against expectations of a 2.6% print.
Preliminary Flash GDP data for the third quarter of the year, released on Wednesday exceeded expectations, boosting the Euro. The Eurozone economy expanded by 0.4% in Q3 of 2024, rising from 0.2% in Q2 against initial estimates of 0.2% growth. The Eurozone economy also expanded by 0.3% in the first quarter of 2024. Germany, the Eurozone’s leading economy, grew by 0.2% in the third quarter of the year, avoiding entering into recession as was predicted by analysts. The economic outlook of the EU remains fragile as prolonged tightening has brought the Euro area economy to the brink of recession.
GBP/USD traded sideways last week, oscillating around the 1.295 level. If the GBP/USD rate goes up, it may encounter resistance near 1.317, while support may be found near 1.280.
Britain’s new Labour Government announced its first budget on Wednesday, causing volatility in the price of the Sterling. The Sterling plummeted ahead of the announcement of the Autumn Forecast Statement on Wednesday but recovered soon after. Markets had time to digest the news on Thursday and the Sterling dipped. UK Chancellor of the Exchequer Rachel Reeves revealed a 40 billion pound tax rise, which will be spent largely on the health and energy sectors.
The BOE voted to maintain its restrictive monetary policy in September, while the US Federal Reserve pivoted to a more dovish policy and voted in favor of a sharp 50-bp rate cut. The difference in policy outlook between the Fed and the BOE is boosting the Sterling against the dollar.
The BOE kept its official rate at 5.25% to 5.00% after cutting interest rates in July. BOE policymakers voted to keep interest rates steady with a majority of 8-1. Bank of England Governor Andrew Bailey has stated that he is optimistic that inflationary pressures in the UK will ease sufficiently to allow for the BOE to cut interest rates further.
Markets anticipate that there will be one more 25bps BOE rate cut in 2024, bringing the total decrease in interest rates to 50bps for the entire year. In contrast, two more Fed rate cuts of 25 bps each are priced this year. After September’s 50-bps Fed rate cut, this will mean that the Fed will lower interest rates by a total of 100 bps in 2024. The Fed’s recent dovish shift compared to the BOE’s more hawkish policy is putting pressure on the Sterling against the dollar.
Headline inflation in the UK dropped to 1.7% year-on-year in September from 2.2% in August against expectations of a print of 1.9%. Core annual inflation, which excludes food and energy, dropped to 3.2% in September from 3.6% in August against 3.4% anticipated. Inflation in the UK has cooled to its lowest level since April 2021 and may induce the BOE to start cutting interest rates more aggressively.
GDP data showed that the British economy grew unexpectedly in August. The UK economic outlook has improved as the British economy expanded by 0.2% in August after remaining stagnant in June and July. The British economy expanded by just 0.5% in the second quarter of the year, failing projections of 0.6% and following 0.7% growth in the first quarter of 2024.
The Yen gained strength after the BOJ policy meeting last week and USD/JPY dipped from 153.8 to 152.3. If the USD/JPY pair declines, it may find support at 147.3. If the pair climbs, it may find resistance at 153.8.
The BOJ maintained its current monetary policy guidelines steady and its interest rate at 0.25% at its policy meeting on Thursday. The BOJ had pivoted to a more hawkish policy at its meeting in July, raising interest rates by 15 basis points, the BOJ’s largest rate hike since 2007. The BOJ had already hiked interest rates once more in March, ending its negative interest rate policy.
Markets were not expecting a change in policy at Thursday’s meeting and focused instead on the BOJ’s forward guidance. BOJ Governor Kazuo Ueda delivered a hawkish speech after the policy meeting, boosting the Yen. Ueda hinted at another rate hike in the following months, if economic and inflationary conditions are met. Data emphasized, however, that the BOJ’s policy will be data-driven and stated that the central bank will scrutinize data before each policy meeting.
Political uncertainty in Japan caused the Yen to plummet at Monday’s market opening. Japan's ruling Liberal Democratic Party failed to secure a majority in the House of Representatives election. Prime Minister Shigeru Ishiba's coalition lost its parliamentary majority on Sunday. Without securing a majority, the Japanese government will find it difficult to enforce its economic and legislative goals.
Inflation in Japan dropped to 2.4% year-on-year in September from 2.8% in August against expectations of a 2.3% print. BOJ Core CPI remained at 1.8% year-on-year in August, the same as in July. Annual Tokyo Core CPI fell to 1.8% in October from 2.0% in September, which was in line with expectations. Inflation in Japan remains weak lowering the odds of another BOJ rate hike this year.
Japan’s economy expanded by 0.7% in the second quarter of the year. The Japanese economy has started to expand, after shrinking by 0.5% in the first quarter of the year.
Gold prices exhibited high volatility last week, rising from $2,730 per ounce to an all-time high of $2,789 per ounce on Wednesday, then paring the week’s gains and plummeting to $2,740 per ounce at the end of the week. If gold prices rise, they may encounter resistance at the psychological level of $2,800 per ounce, while if gold prices decline, support may be encountered near $2,700 per ounce.
Geopolitical tensions raise the appeal of safe-haven assets propping up gold prices. Gold prices hit a new all-time high of $2,789 per ounce on Wednesday. Gold prices had been trading in overbought territory, however, and tumbled on Thursday as traders started realizing their gains.
The crisis in the Middle East is boosting demand for safe-haven assets, keeping gold prices high. In the past few weeks, markets had been bracing for Israel’s retaliatory attack against Iran, keeping gold prices up. Israel’s attack over the weekend, however, did not inflict substantial damage and was seen as a token retaliatory attack. The Iranian government announced that there would be an appropriate response to Israel’s attack, but Iran’s President emphasized that they do not seek a war with Israel. Signs that the crisis between Israel and Iran is de-escalating put pressure on gold prices towards the end of last week. On Saturday, however, Iran’s Supreme Leader Ayatollah Ali Khamenei threatened Israel with a crushing response, which is likely to raise the appeal of safe-haven assets again this week.
Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar dipped last week, and the dollar index dropped from 104.5 to 104.3. On the other hand, US treasury yields gained strength with the US 10-year bond yield rising from 4.27 to 4.39%.
Uncertainty over the upcoming US presidential elections is causing volatility in gold prices. The US elections on November 5th are attracting considerable market attention. The implications of the election outcome, however, are complex and will likely cause volatility in gold prices in the weeks to come.
Gold prices continue to rise on expectations of further Fed rate cuts. The US Federal Reserve pivoted to a more dovish policy last week, performing a sharp rate cut of 50 basis points. The Federal Reserve decided to end its restrictive monetary policy in September, bringing its interest rate down to a target range of 4.75% to 5.00%.
The US FedAfter the meeting, the market reserve will announce its interest rate decision on November 7th and raise interest rates by 25 basis points this week. Market participants will focus on Fed Chair Jerome Powell’s press conference after the meeting for hints on the Fed’s rate outlook.
Oil prices gained strength last week and WTI price rose from $68.9 per barrel to 71.2 per barrel last week. If oil prices retreat, they may encounter support near $66.9 per barrel, while resistance may be found near $72.8 per barrel.
The ongoing crisis in the Middle East threatens to disrupt oil distribution. Concerns of a broadening conflict in the Middle East are boosting oil prices. The conflict between Israel and Hamas continues to escalate, threatening to affect oil supply and distribution.
Israel launched a series of missiles against Iran over the weekend but did not inflict substantial damage. The Iranian government announced that there would be an appropriate response to Israel’s attack, but Iran’s President emphasized that they do not seek a war with Israel. On Thursday, however, a report stating that Iran plans an attack against Israel in the coming days from Iraqi soil boosted oil prices. In addition, Iran’s Supreme Leader Ayatollah Ali Khamenei threatened Israel with a crushing response on Saturday, which is likely to boost oil prices.
US crude oil inventories released on Wednesday showed an unexpected drop in US crude stockpiles, boosting oil prices. The US Energy Information Administration reported a weekly crude stockpile draw of 0.5M barrels for the week to October 25th, against expectations of a 1.5M barrel build and following a rise of 5.5M barrels the week before.
Oil prices are also kept in check by high central banks’ interest rates. The Federal Reserve cut its benchmark interest rate by 50 basis points to a target range of 4.75% to 5.00% in September, after holding interest rates steady since last July.
The US Federal Reserve will announce its interest rate decision on November 7th and is expected to lower interest rates by 25 basis points this week. After the meeting, market participants will focus on Fed Chair Jerome Powell’s press conference for hints on the Fed’s rate outlook.
Bitcoin price rose from $67,800 to $73,570 last week, then dropped back to $68,700 over the weekend. If the BTC price declines, support can be found at $65,000, while resistance may be encountered at the all-time high of $73,800.
Ethereum price rose from $2,480 to $2,710 last week but pared the week’s gains towards the end of the week, dropping back to $2,460. If Ethereum's price declines, it may encounter support near $2,330, while if it increases, resistance may be encountered near $2,760.
Fluctuating risk sentiment is causing volatility in crypto markets. The US elections on November 5th are attracting considerable market attention. Crypto markets have been gaining strength on rising expectations that Donald Trump will win the Presidential elections. Trump’s odds of winning the elections are rising in the polls, with new polls showing that Trump and Harris are neck-in-neck. Trump’s proposed tariffs and tax policies will support economic growth, boosting high-risk assets such as cryptocurrencies. In addition, Trump has openly declared his support of crypto markets, announcing that he will make the US ‘the crypto capital of the planet’. Bitcoin price rose above $73,500 last week on expectations that Trump might win the Presidential race, coming close to its all-time high reached in March.
Cryptocurrency prices are affected by central banks’ interest rates. High interest rates are restricting economic growth, putting pressure on risk assets, while the promise of rate cuts boosts crypto markets. The US Federal Reserve performed a drastic rate cut of 50 basis points in September, bringing its interest rate down to a target range of 4.75% to 5.00%.
The US Federal Reserve will announce its interest rate decision on November 7th and is expected to lower interest rates by 25 basis points this week. After the meeting, market participants will focus on Fed Chair Jerome Powell’s press conference for hints on the Fed’s rate outlook.
Concerns of a broadening conflict in the Middle East are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. The conflict between Israel and Hamas continues to escalate, putting pressure on risk assets such as cryptocurrencies.
In the past few weeks, markets had been bracing for Israel’s retaliatory attack against Iran. Israel’s attack over the weekend, however, did not inflict substantial damage. The Iranian government announced that there would be an appropriate response to Israel’s attack, but Iran’s President emphasized that they do not seek a war with Israel. On Thursday, however, a report stating that Iran plans an attack against Israel in the coming days from Iraqi soil, put pressure on crypto markets. In addition, Iran’s Supreme Leader Ayatollah Ali Khamenei threatened Israel with a crushing response on Saturday, which is likely to cause risk sentiment to sour.
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Written by:
Myrsini Giannouli
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