China retail sales (Oct) – 15/11 – last week’s China trade numbers for October showed that imports and exports fell into negative territory, speaking to the fact that the Chinese economy has continued to underperform. In August consumer spending rebounded strongly, rising 5.4%, however this improvement wasn’t sustained into September, as sales fell back to 2.5%. This suggests that the August pickup was primarily down to pent-up demand being released. China’s zero-covid policy will continue to drive the numbers here, and while we’ve heard that the Chinese government is wargaming some re-opening scenarios, prompting some optimism that it could happen soon, this comes across as wishful thinking. With the weather starting to get colder and heading into winter infections can only go one way. That fact will make any sort of reopening impossible unless China changes tack. This seems unlikely; therefore, we can expect to see many months of poor retail sales numbers as we head into 2023. October retail sales are likely to slow from the numbers we saw in September with a rise of 0.7% expected. Industrial production is expected to slow from 6.3% to 5.2%.                     UK Wages/Unemployment (Sep) – 15/11 – if there was a silver lining with respect to the bleak economic outlook then it’s in the form of a low unemployment rate, which fell to a 48 year low of 3.5% in the 3 months to August. Wage growth including bonuses also edged higher to 6%, over the same period, but once again the focus was on the economic activity rate which rose to a record high of 21.7%. The number of long-term sick rose to 2.5m, while job vacancies fell by a modest 46k, to 1.25m. This remains the elephant in the room when it comes to the wider unemployment numbers, however vacancy rates still remain at elevated levels which means that there’s unlikely to be a spike in unemployment levels in the short term. UK CPI (Oct) – 16/11 – UK inflation got a bit of a respite in August falling back to 9.9% from 10.1% in July, with the fall in petrol prices helping to pull the headline number back below double figures. This didn’t last very long as prices edged back to 10.1% in September, with food prices continuing to act as a tailwind, with these rising from 13.1% to 14.6%. These increases could translate into an October reading of 10.5% this week, with the increase in the new energy price cap also expected to act as a tailwind. The rise in core prices is also starting to become a larger concern despite the stabilisation being seen in energy prices in the last few months. Having raised interest rates by 75bps last month the Bank of England will be hoping that we don’t move too much higher than the 6.5%, and 40 year high, that prices edged up to in September. The new government’s fiscal plans could also play a part in slowing inflation with the various tax rises and spending cuts that are likely to be outlined later this week. There’s no better way to slow inflation than to kill demand which is what the governments new plans look set to do. Wages are holding up reasonably well on a historical basis but they still remain well below headline inflation levels. More encouragingly PPI inflation does appear to be showing signs of slowing, which could translate into lower inflation as we head into 2023.  UK Mini Budget – 17/11 – this week we are expected to get the final details of the various spending cuts and tax rises that the new government is set to earmark when it comes to addressing the so-called £40bn black hole in the public finances. The last few weeks have seen UK gilt markets, as well as the pound come under pressure over concerns about the sustainability of the UK’s public finances. Since the change of leadership at the top of government these concerns have abated as has the pressure on the pound and gilt yields. What is more concerning is that the framing of the discussion hasn’t shifted at all in terms of convincing the markets that future spending plans will be properly scrutinised, to the damage that these measures will do to the economy in the round. This fixation on what to all intents and purposes is an imaginary black hole, premised on a host of false assumptions is likely to be hugely damaging to the UK economy. The market didn’t care when the government was spending almost £350bn on various Covid support measures in the previous fiscal year, yet we are supposed to believe that suddenly there’s huge concern about a £35bn fiscal hole that the government suddenly need to plug. The...

Gold keeps firm bullish tone on Friday and extends strong rally from $1616 (Nov 3) low, trading at the highest levels since mid-August. The yellow metal’s price accelerated sharply higher on talks that the Fed may ease its hawkish policy, with the notion being boosted by US CPI data which showed that inflation cooled further in October, adding to hopes that the US central bank could start tempering its aggressive stance in raising interest rates. Fresh weakness of the dollar also contributed in boosting gold’s appeal. Daily chart studies are bullish but overbought, suggesting that bulls may pause for consolidation, with limited dips, as gold is on track to end the second week in green and also for the biggest weekly advance in over 2 years. This adds to the bullish signals on formation of reversal pattern on weekly chart. Bulls need to clear key barriers at $1789/$/$1803 zone (Fibo 38.2% of $2070/$1616 / psychological / 200DMA) to confirm reversal signal and open way for stronger recovery. Today’s low offers initial support at $1747, followed by former top at $1729 (Oct 4) and broken Fibo 23.6%  ($1722). Res: 1756; 1782; 1788; 1800 Sup: 1747; 1729; 1722; 1711

GBPUSD has gone into a consolidation phase following Wednesday's decline. Near-term technical outlook points to a bearish shift. US Dollar's reaction to US CPI data will help GBPUSD determine its next direction. GBPUSD has started to fluctuate in a relatively tight range on Thursday after having registered large losses on Wednesday. The pair trades below key resistance levels and the technical outlook suggests that buyers remain on the sidelines. Nevertheless, the market reaction to the US October inflation data is likely to provide the next directional clue for the pair. In the absence of high-impact macroeconomic data releases, the risk-averse market environment allowed the US Dollar to gather strength against its major rivals on Wednesday. Although the US stock index futures trade modestly higher on the day, it's too early to assume that risk flows have returned to markets.  The US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for October at 1330 GMT. Investors expect the annual CPI to decline to 8% from 8.2% in September and see the Core CPI edging lower to 6.5% from 6.6%. In case the annual core inflation reading comes in at or below the market consensus, Wall Street's main indexes could gain traction and the US Dollar could have a hard time finding demand. In that scenario, GBPUSD is likely to turn north. On the other hand, the pair could extend its slide if investors start pricing in another 75 basis points (bps) rate hike in December on a stronger-than-forecast core CPI print. The US economic docket will also feature the US Department of Labor's weekly Initial Jobless Claims data but market participants are likely to stay focused on the inflation report. GBPUSD Technical Analysis GBPUSD broke below the 100-period Simple Moving Average (SMA) on the four-hour chart on Wednesday and closed the last five four-hour candles below that level. Meanwhile, the Relative Strength ındex (RSI) indicator on the same chart retreated below 50, confirming the bearish tilt in the short-term technical outlook. On the downside, 1.1340 (static level) aligns as initial support before 1.1300 (psychological level) and 1.1280 (200-period SMA). In case the pair manages to reclaim 1.1400 (100-period SMA, 50-period SMA), it could stretch higher toward 1.1450 (20-period SMA, static level) and 1.1500 (psychological level, static level).

Markets Stocks surged in a  rising tide lifts-all-boats scenario as slower-than-projected inflation galvanized bets the Federal Reserve can downshift its aggressive rate-hike path. To say markets reacted positively to the report would be an understatement, as the enraptured price action suggests investors interpreted the softer inflation print as a significant turning point, particularly in inflation, central bank hawkishness, recession risk, and investors' bearishness. All of which should pave the way for a Santa rally on the back of a better-tempered Fed to the cheers of global investors. These moves should see investors dancing in the streets. Although inflation remains at decade highs, at minimum, things are moving in the right direction,  not to mention the downside surprise is the best news we've had in some time. Notably, the anticipated Fed downshift comes at a critical juncture and should offset covid related economic concerns in China and, at minimum, provide a less hawkish bridge for the eventual reopening.  The dollar's rise over the past year has left Asian markets increasingly exposed to capital outflow, so with one fell inflation swoop, that external vulnerability has been eased and should open the door to inbound investment given the softer US dollar and an expected less hawkish Fed.   President Xi Jinping has broken tradition and wants all policies to be consistent with resilience and self-reliance. Hence foreign investors should drive flow toward tech and manufacturing. Given the move in global rates, the post-CPI first leg will likely play out through Asia tech.   Gold Gold soared as the cooler-than-expected US October CPI has the market pricing in a 50bp Fed hike in December, which sees the greenback tanking positively for gold. Investors who bought into the long gold theme last week are well-placed to benefit from a Fed pivot, with prices poised to rally as real rates peak and eventually head lower.    Oil Oil prices are also getting a reprieve from the weaker US dollar, and a significant repricing lower in US recession risk as a soft landing looks far more credible with the Fed likely to dial down. That said, oil prices were the risk rally laggard as sentiment is still sullied by the rise of covid case counts in China and anticipated lockdowns. Rolling lockdowns across heavily populated areas in China penalize mobility and oil demand even more than economic activity.   Since traders are hyper-sensitive to lockdowns in the world's largest oil importer, this could temporarily hold the oil market's top-side ambition in check. But unquestionably, we are in a much better place than yesterday.    Forex The October US CPI print is good news for the Fed. It should cement the stepdown in hiking pace to 50bp at December's FOMC, greenlighting another bout of USD weakness, a narrative the market has already been leaning into, setting up further USD turnover into 2023. So we could expect long USD unwinds to remain in vogue    Temper expectations? The 'easy' bit for US inflation is getting from 10% to 5%. The tricky bit is getting from 5% to 3%. And the challenging bit is getting from 3% to 2% The US Federal Reserve laid out its policy path in September: 75, 50, 25. And the data follows a way that matches that. December was guided as 50, and it looks like it will be. The risk, however, is that the stickier parts of inflation remain, well, tacky. Futures drove most of the move higher, and the same with ETF hedge unwinds. It will be interesting to see if the activity in rates will trigger a more significant rotation back into growth. If you think liquidity was lousy yesterday - it will get worse today with bond markets closed.

It was quite a day across the financial markets on Thursday as the eagerly awaited US inflation data hit the wires at 1:30 pm GMT. Consumer prices, measured by the Consumer Prices Index (CPI), increased less than anticipated. According to the Bureau of Labour Statistics (BLS), consumer prices increased 7.7% on a year-over-year basis, following September's 8.2% reading, representing the fourth decline since topping at 9.1% in June (its largest increase since the early 1980s). Interestingly, this is the first time since February this year that the headline year-on-year inflation print has been south of the 8.0% mark. Core annual inflation for October—excluding volatile food and energy prices—rose 6.3%, from 6.6% recorded in September. In terms of the month-over-month data, the CPI rose 0.4% in October, identical to September's reading. Core monthly inflation, however, rose 0.3%, following September's rise of 0.6%. The BLS highlighted the following: The energy index increased 17.6% for the 12 months ending October, and the food index increased 10.9 percent over the last year; all of these increases were smaller than for the period ending September. This suggests that the US Federal Reserve may ease rate hikes, after the central bank delivered a fourth consecutive super-sized 75 basis-point hike on 2nd November. Fed Funds Futures, according to the CME's FedWatch Tool, shows that the target rate probability for a 50 basis-point hike at the mid-December Fed meeting has risen to 80.6%, with a 19.4% chance of a 75 basis-point increase. This expectation was clearly felt in the markets on Thursday. (CME FedWatch Tool) US Equities: Long Term-Bullish Flag Eyed Major US equity indices powered higher in recent movement, seeing the Nasdaq 100 jump 6.0% at one point; the S&P 500 was also not far behind at 4.6% with the Dow higher by 3.0%. Of technical relevance is the Dow (see chart below) on the monthly scale, exhibiting interest above the upper limit of a bullish flag pattern, taken from the high of 36,952 and a low of 32,272. Note that this market has been entrenched within a dominant uptrend since early 2009. Strength in procyclical currencies on Thursday should not surprise. Against the broadly softer dollar (Dollar Index down nearly 2.0%), the Australian dollar, the New Zealand dollar and the Canadian dollar all staged strong outperformance, up 2.5%, 2.1% and 1.2%, respectively. AUD/USD: Head and Shoulders, Anyone? The AUD/USD (see daily chart below) has been a market I have been watching for a while. Through the lens of a technician, attention has been drawn to the daily timeframe's potential inverted head and shoulders pattern ($0.6363; $0.6170; $0.6272). Although the currency pair has emphasised a clear-cut downtrend since early 2021, price recoiled from daily support at $0.6212 and just north of weekly demand at $0.5975-0.6166 (see weekly chart). The strength behind Thursday's upside unleashed a decisive close above not only daily resistance at $0.6536, but also beyond the inverted head and shoulders pattern neckline, pencilled in from the high $0.6547. With the aforementioned resistance cleared, daily resistance calls for attention at $0.6678, followed by the pattern's profit objective set at $0.6875. Adding to the current bullish vibe, the relative strength index (RSI) retested the upper edge of the 50.00 centreline and touched the 60.00ish neighbourhood, with indicator resistance visible at 61.29. Consequently, heading into Friday's sessions, traders may pursue bullish scenarios above $0.6536 on the lower timeframes.

What you need to take care of on Thursday, November 10: The American dollar benefited from a dismal market mood, recovering some of the ground lost but still down for the week against most major rivals. US stocks reflected the negative sentiment, with Wall Street ending the day in the red. US Treasury yields, however, were little changed ahead of the release of US inflation figures. The Consumer Price Index is expected to have risen in October by 8% YoY, below the previous 8.2% reading. Global news were mixed. On the one hand, news coming from China weighed on sentiment as the country locked down another district amid the coronavirus spread. On the other, Russia is retreating from Kherson, the only Ukrainian regional capital captured since the invasion began, as Moscow can’t keep supplying troops. Also, news indicated that Russian President Vladimir Putin would not attend the upcoming G-20 summit.  EURUSD finished the day near 1.0010, while GBPUSD is down to 1.1340. Commodity-linked currencies were also sharply down, with AUDUSD trading around 0.6420 and USDCAD up to 1.3512. Safe-haven assets gave up little ground against the greenback. USDCHF trades at 0.9860, while the USDJPY pair trades around 146.50. Gold trades at around $1,705 a troy ounce, retaining most of its weekly gains. Crude oil prices, on the other hand, collapsed after the release of US inventories, showing a larger-than-expected build of 3.925 million barrels in the week ended November 4. WTI trades at around $86.00 a barrel.  Cryptos extended their slump amid the FTX collapse. The company is being investigated by the US SEC, while Binance is likely to refrain from rescuing its former rival. BTCUSD trades around $16,660, its lowest since November 2020.