Key Financial Updates and Central Bank Decisions.

USD: The 10-year US Treasury yield surged to its highest point since mid-2007 after Federal Reserve Chair Jerome Powell acknowledged the impact of tightening financial conditions, without ruling out further tightening due to the strong economy. Bonds and stocks show an inverse relationship, indicating the bond market’s role as a leading indicator for equities. Gold reached a five-month high amid rising demand for safety assets. The third-quarter earnings season in the US is underway, with positive earnings surprises.

EUR: The focus is on the European Central Bank’s Thursday interest rate decision, expected to maintain rates with a commitment to keeping them high. The Bank of Canada is also set to keep rates steady due to moderating inflation. Key data includes Germany’s GfK Consumer Confidence, HCOB Manufacturing PMI Flash, and UK jobs data on Tuesday. Wednesday features Australia’s Q3 CPI, Germany’s Ifo Business Climate, and the Bank of Canada’s rate decision. Thursday brings the ECB’s decision, President Lagarde’s speech, Fed Chair Powell’s speech, US durable goods orders, and Q3 GDP data. The week concludes with the US Core PCE Price Index on Friday.

GBP: Andrew Bailey, the Governor of the Bank of England, expressed optimism regarding a significant drop in inflation by October, following a sharp increase in energy prices last year. In an interview with the Belfast Telegraph, Bailey revealed that the central bank had originally projected a year-end inflation rate of 4.9%, but September saw an unexpectedly high inflation rate of 6.7%. This figure, which outstripped inflation rates in other major advanced economies, led to investor speculation about a possible interest rate hike. However, Bailey contended that these figures were in line with the central bank’s expectations and emphasized a slight decrease in core inflation. He also stressed the importance of a substantial reduction in wage inflation to bring overall inflation closer to the bank’s two percent target. Despite the unexpected inflation hold in September, Bailey pointed to a reassuring reduction in core inflation to 6.1%. He attributed his prediction of a significant decline in headline inflation in October to the fact that last year’s energy price spike no longer plays a significant role in the annual comparison.

Economic Calendar