The Week Ahead 30th October – 3rd November: Fed and BoE Rate decisions – Will November bring policy shifts?

<p>Welcome to Key To Markets preview of the Week Ahead</p>
<h2>Currency Pair Performance</h2>
<p>5-day performance as of <strong>October 26, 2023. 13:00 GMT</strong></p>
<p><img decoding="async" fetchpriority="high" class="alignnone wp-image-26587 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/currencypairperformance-2.png" alt="" width="904" height="400" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/currencypairperformance-2.png 904w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/currencypairperformance-2-300×133.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/currencypairperformance-2-768×340.png 768w" sizes="(max-width: 904px) 100vw, 904px" /></p>
<p>Source: finviz.com</p>
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<h2>10 Big Stories Last Week</h2>
<p>In case you missed it…</p>
<p><strong>ECB left interest rates unchanged.</strong> As expected, the central bank left rates at the record 4% level after ten straight hikes. The meeting came against a backdrop of a deteriorating economic outlook.</p>
<p><strong>Alphabet tumbled 9% after earnings.</strong> The Google parent beat profit and revenue forecasts. However, investors were unimpressed with Google Cloud&#8217;s slowing revenue growth.</p>
<p><strong>Microsoft rose after Q1 beat.</strong> The tech giant beat fiscal Q1 estimates with EPS of $2.99, 12.8% ahead of forecasts on revenue of $56.52 billion. Azure posted 29% revenue growth.</p>
<p><strong>Ford agreed a deal with the UAW union.</strong> Ford offered a 25% pay increase over a four-year contract, hoping to end strike action that has disrupted operations for weeks.</p>
<p><strong>US treasury yields hit 5%.</strong> Stronger than expected US PMI data fueled bets that the Federal Reserve would keep rates higher for longer, lifting the US 10-year treasury yield to 5%.</p>
<p><strong>Gold rose towards $2000.</strong> The precious metal rose firmly on safe-haven flows despite a rising USD and treasury yields.</p>
<p><strong>BoC left rates unchanged.</strong> The central bank left rates unchanged at 5% for a second straight month but left the door open for further hikes if needed. The BoC warned about a deteriorating economic outlook.</p>
<p><strong>Barclays falls after Q3 results.</strong> Q3 profits comfortably beat forecasts, but the share price tumbled after it cut full-year NIM guidance and signaled significant cost-cutting.</p>
<p><strong>Meta fell on weak guidance.</strong> The social media giant posted strong revenue and earnings growth but warned of lower advertising demand in the current quarter.</p>
<p><strong>Deutsche Bank jumped after strong results.</strong> The bank posted a profit before tax of €5 billion and its highest revenue forecast in 7 years. Deutsche Bank also pledged to raise investor returns.</p>
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<h2>Chart of the Week</h2>
<p><img decoding="async" class="alignnone wp-image-26584 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/chartoftheweek-3.png" alt="" width="904" height="552" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/chartoftheweek-3.png 904w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/chartoftheweek-3-300×183.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/chartoftheweek-3-768×469.png 768w" sizes="(max-width: 904px) 100vw, 904px" /></p>
<p>Big tech had a lot to live up to this earnings season. The magnificent seven tech companies were responsible for a significant part of this year’s stock market rally. However, earnings have been broadly disappointing, wiping $200 billion from their market value as the lofty valuations no longer hold up while threatening to push the S&amp;P500 into a correction. The S&amp;P500 trades down 8.8% from its peak, close to the 10% fall needed for a correction.</p>
<p>Tesla earlier in the month, Alphabet and Meta have fallen sharply after reporting, with Microsoft the only bright spot so far. Amazon is yet to report at the time of writing, and Apple and Nvidia are reporting in November.</p>
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<h2>5 Things to Watch This Week</h2>
<p><strong>1. Fed rate decision</strong><br />
The Federal Reserve is not expected to raise interest rates when it announces its rate decision on Wednesday, the 1st of November, although it could still point to another rate hike in December. A series of stronger-than-expected economic growth across the last quarter shows the resilience of US consumers and businesses despite the Federal Reserve&#8217;s efforts to cool expansion with high interest rates. However, high treasury rates are also doing some of the hard work for the Fed. The market is pricing in just a 30% probability of a rate hike in December.</p>
<p><strong>2. BoE rate decision</strong><br />
The Bank of England will announce its interest rate decision on Thursday, the 2nd of November, and is widely expected to leave rates on hold at 5.25%. While inflation remained sticky at 6.7% in September, signs of weakness are starting to appear in the labour market, and PMI data showed that business activity contracted for a third straight month, given the deteriorating economic outlook and that the impact of previous hikes is still coming through policymakers unlikely to lift rates. In fact, money markets are starting to believe that the Bank of England has reached peak rates as the UK risks running into recession.</p>
<p><strong>3. BoJ rate decision</strong><br />
The BoJ will announce its rate decision on Friday, the 3rd of November. The meeting comes as the yen sinks to its weakest level against the dollar in a year. The BoJ is widely expected to leave policy parameters such as yield curve control, its purchase program, forward guidance, and interest rates unchanged. However, it could increase its inflation projection for full-year 2023/24. The market could interpret this as an increased possibility of normalization in the coming months.</p>
<p><strong>4. Apple earnings</strong><br />
Apple is due to report earnings on Thursday, the 2nd of November, after the market close. Expectations are for EPS of $1.39 on revenue of $89.35 billion. The results could benefit from the timing of the iPhone launch, which saw all four iPhone models being released at the same time- a potential tailwind to revenue growth. However, there are also several headwinds, including the maturity of the smartphone market, a tough macroeconomic backdrop, and concerns over sales in China.</p>
<p><strong>5. US Non-Farm Payrolls</strong><br />
The US jobs report will be released just days after the Federal Reserve interest rate decision. However, with the Fed expected to leave rates unchanged and push the focus to the December meeting, the market will watch data points even more closely. Recent non-farm payroll reports have highlighted the strength of the labour market, with September payrolls double the forecast level, although average hourly earnings eased modestly. Another strong jobs report could boost hawkish Fed bets, pulling stocks lower and lifting the USD.</p>
<h2>Economic Calendar Highlights</h2>
<p><img decoding="async" class="alignnone wp-image-26598 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar1-1.png" alt="" width="904" height="624" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar1-1.png 904w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar1-1-300×207.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar1-1-768×530.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar1-1-260×180.png 260w" sizes="(max-width: 904px) 100vw, 904px" /></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26602 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar2-1.png" alt="" width="904" height="732" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar2-1.png 904w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar2-1-300×243.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/economiccalendar2-1-768×622.png 768w" sizes="(max-width: 904px) 100vw, 904px" /></p>
<p>Source: FXStreet.com</p>
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<h2>Technical Analysis:</h2>
<p>TA of the major asset classes (Forex &#8211; Commodities &#8211; Indices…).</p>
<p><strong>EUR/USD (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26605 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/eurousd-1-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>EUR/USD is in the correction of a downtrend, making higher highs and lows below the 50 SMA. RSI is neutral. Price is consolidating in possible bearish flag, implying a possible break below the lows at 1.043. A break and close above the 50 SMA is needed to confirm a weekly hammer pattern off long-term support.</p>
<p><strong>GBP/USD (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26608 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/gbpusd-1-1-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>GBP/USD is in a correction within a downtrend, forming mixed lows and highs below the 50 SMA. RSI is neutral. The hammer on the weekly candle chart is bullish, but the trend remains down, implying the current sideways action resolves lower.</p>
<p><strong>USD/JPY (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26611 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/usdjpy1-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>USD/JPY is in an uptrend, making equal highs and higher lows above the 50 SMA. RSI is bullish but not overbought. Price is still consolidating in a tight range under 150.0, hinting at an eventual break higher, but a hanging man pattern on the weekly chart at a round number is bearish.</p>
<p><strong>Gold (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26614 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xauusd-1-1-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>XAU/USD is in an uptrend, forming higher highs and lows above the 50 SMA. RSI is overbought above 65. Price has put in a massive rally off the low at 1810 and has now broken resistance at 1980, where some consolidation is likely before the next move either way.</p>
<p><strong>Brent Oil (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26617 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xbrent-1-1-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>XBRENT is in a sideways treend, making mixed lows and highs below the 50 SMA. RSI is neutral but just dipped under 50. The failure to take out the double top at 95 followed by the drop under the 50 SMA is near term bearish with support for the long term uptrend at 83.</p>
<p><strong>US500 (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26620 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/xus500-1-1-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>XUS500 is re-testing the September lows. RSI is bearish but not oversold. Price is trending lower in a wide channel that still looks to be a correction of the long term uptrend. A break back over the 50 SMA in line with the major uptrend seems most likely but a break lower could signify a much bigger decline towards 4000.</p>
<p>Thank you very much for reading – and have a great week trading!</p>
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