After four consecutive 75bp hikes, the Federal Reserve will likely look to slow the pace of rate hikes from December. The key US data release next week is month-on-month core CPI, which we expect to be 0.5%. Other releases of note include consumer credit and confidence data, however these are shadowed by the mid-term elections on Tuesday.. US: Mid-term elections in focus Federal Reserve chair Jerome Powell has successfully brought the market on board with the notion that while the central bank will likely look to slow the pace of rate hikes from December after four consecutive 75bp moves, the terminal interest rate will likely end up being higher than what it signalled back in September. Nonetheless, this will depend on the data flow. If inflation and job numbers continue to come in on the strong side it may be that officials end up doing a fifth 75bp. Given this uncertainty, markets are currently pricing around 58bp for the December meeting and 42bp for February, with a final 25bp hike coming at some point in the second quarter. Next week’s data will be important, but not critical in determining the path forward. The key release is the consumer price index with the focus within that being the month-on-month core (ex-food and energy) number. Over the past six months, we have had one 0.7%, four 0.6% and one 0.3% print. We need to see numbers closer to 0.2% to bring the annual rate down toward the 2% target over time. The consensus right now is for 0.5% next week, which is also our prediction. There is a second bite of the cherry ahead of the December FOMC meeting on 14 December given November CPI is published on 13 December. Nonetheless, if we get a downside surprise we could see markets looking to price in a greater chance of a 50bp December hike and possibly a slightly lower terminal rate. Other data includes consumer credit and consumer confidence along with small business optimism. However, these will be overlooked given the mid-term elections on Tuesday. Opinion polling appears to show momentum is building for Republican party candidates with a majority in both the House and the Senate now looking like the most likely outcome. We have written up a scenario analysis of the possible outcomes, but essentially if the Republicans gain control of Congress, President Joe Biden’s ability to pass legislation will be severely curtailed. Indeed, there is far less probability of any fiscal support for the economy through the recession than if the Democrats retained control of Congress given Republicans will look to block it. Consequently, if the Democrats lose then it is more likely that we will see interest rate cuts in the second half of 2023 to provide the stimulus to help the economy rebound, rather than if they win where fiscal policy would likely do more of the heavy-lifting and interest rates stay higher for longer to offset any inflation impulse. Key events in developed markets next week Read the original analysis: Key events in developed markets next week

Gold price ended up closing a volatile week in positive territory. The US Dollar lost its strength toward the end of the week despite the Fed's hawkish stance. XAUUSD could extend its recovery in case it confirms $1,675 as support. Following Monday's decline, Gold price gained traction and registered strong daily gains on Tuesday. Although the US Federal Reserve's hawkish tone forced XAUUSD to lose its traction mid-week, the improving market mood and the broad-based US Dollar weakness ahead of the weekend helped the pair stage a rebound and close the week in positive territory. Next week's Consumer Price Index (CPI) data could help Gold price determine its next short-term direction.  What happened last week? The negative shift witnessed in the risk mood at the beginning of the week helped the US Dollar (USD) stay resilient against its rivals and caused Gold price to continue to push lower. The disappointing PMI data from China, which showed that business activity contracted in October, caused investors to seek refuge. On Tuesday, Gold price reversed its direction as US Treasury bond yields declined after the Reserve Bank of Australia's decision to hike its policy rate by only 25 basis points. In the second half of the day, the data from the United States revealed that JOLTS Job Openings increased to 10.7 million on the last business day of September, compared to the market expectation of 10 million, and helped the US Dollar find its footing. Additionally, the ISM Manufacturing PMI came in at 50.2 in October, surpassing analysts' forecast of 50. Although Gold price struggled to preserve its bullish momentum during the American trading hours on upbeat United States data, it ended up gaining nearly 1% on the day on Tuesday. The monthly report published by Automatic Data Processing (ADP) revealed on Wednesday that employment in the US private sector rose by 239,000 in October. This print beat the market projection of 193,000 but failed to provide a boost to the US Dollar with investors staying on the sidelines ahead of the US Federal Reserve's (Fed) highly-anticipated policy announcements. Meanwhile, Gold price managed to build on Tuesday's gains and advanced toward $1,660. As expected, the Fed raised its policy rate by 75 basis points (bps) to the range of 3.75-4% following the November meeting. In its policy statement, the Fed noted that it will take "cumulative tightening, policy lags and economic and financial developments" into account when determining the pace of rate hikes. This comment triggered a risk rally as it hinted at a smaller 50 bps rate increase in December. FOMC Chairman Jerome Powell, however, reaffirmed the Fed's hawkish stance by noting that he was expecting the terminal rate to be revised higher in December's Summary of Economic Projections (SEP), the so-called dot plot. Powell explained that it was more important for them to reach the upper limit of the policy rate rather than the size or the speed of rate increases. In turn, US Treasury bond yields gained traction and Gold price made a sharp U-turn, closing the day deep in negative territory below $1,640. With the positive impact of the Fed's policy stance on the USD remaining intact on Thursday, XAUUSD slumped to its lowest level since late September and came within a touching distance of the multi-year low set at $1,615 on September 28. The improving market mood on renewed optimism about China easing coronavirus restrictions provided a boost to Gold price and opened the door for a decisive rebound. The US Dollar struggled to find demand as a safe haven and helped XAUUSD stretch higher toward $1,650 ahead of the October jobs report. The US Bureau of Labor Statistics reported on Friday that Nonfarm Payrolls rose by 261,000 in October, surpassing the market expectation of 200,000 by a wide margin. Annual wage inflation, as measured by the Average Hourly Earnings, however, declined to 4.7% from 5%. Wall Street's main indexes opened decisively higher after this report and XAUUSD built on earlier gains to end the week on a firm footing above $1,660.  Next week In the absence of high-impact macroeconomic data releases in the first half of the week, market participants will pay close attention to developments surrounding China's zero-covid policy. In case China decides to soften its stance on re-opening and confirm market rumours, Gold price is likely to gather strength on the back of an improving demand outlook. On Tuesday, the United States midterm elections will be held but it's difficult to say what kind of an impact the outcome could have on the US Dollar performance against its rivals or the overall market mood. The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data on Thursday. The annual Core CPI is forecast to rise to 6.9% in October from 6.6% in September....

Going into the November meeting markets were fully expecting a 25 bps rate hike. This was despite the latest trimmed mean reading of 6.1% CPI which was on the high side, so there was always a chance of a surprise 50bps hike. In the event, the RBA hiked by only 25bps. The decision as growth revised lower Central banks around the world are trying to balance hiking interest rates to control inflation without over-tightening. The risk, for example, that many economists see is that the Fed is on the brink of over-tightening. So, the RBA has one eye on growth and one eye on inflation. Growth revised lower The RBA is concerned about slowing growth. They revised growth projections lower to 3% this year and 1.5% in 2023 and 2024. So, the RBA will not want to overreact to inflation, by going too hard on rates for too long. Inflation expected to peak this year Inflation is now forecasted to peak at 8% this year before falling to 4.7% over 2023 and just over 3% in 2024. The reaction For many central banks, and the RBA is no exception, a slower path of rate hikes is supportive for stocks. The reaction in the AUDUSD pair was an initial drop and the ASX 200 picked up a little. The expectations of slower rate hikes from the RBA are broadly supportive for Australian stocks. The Short Term Interest Rate market reaction the day after the decision is also affirming for a slower rate path ahead. The terminal rate is expected to be just over 4% down from 4.24% prior to the meeting. See the Financial Source Implied Interest Rate Curve tool below. The RBA also said that it recognises ‘that monetary policy operates with a lag and that the full effect of the increase in interest rates is yet to be felt in mortgage payments. Higher interest rates and higher inflation are putting pressure on the budgets of many households’. So, the bottom line is that the RBA will be data-dependent going forward and will watch the labour market and inflation closely. Learn more about HYCM

US payrolls rose by 239,000 in October, according to Wednesday’s report out of the Automatic Data Processing firm (ADP), beating economists’ estimates for a 178,000 increase. The main highlight of the day, however, was the Fed delivering its fourth consecutive 75-basis point rate hike. This hauled the Federal Funds Rate to a target range of 3.75% to 4.00%. Interestingly, December’s Fed Funds Futures market is now pricing in a 59% probability of only a 50bp hike at 14th December meeting. The aftermath of the release witnessed the US Dollar Index plunge 0.6%, taking the DXY back to within striking distance of 110.00. Dollar weakness was short-lived, nevertheless, pulling off session lows to within pre-announcement levels as markets staged a U-turn amid Fed Chair Powell’s Hawkish comments during his presser: ‘Rates need to move beyond the September Dot Plot forecasted (median 4.6%)’. ‘It is very premature to be thinking about pausing rates’. Essentially, his message was repricing the terminal rate higher and price out any rate cuts for next year. Major US equity indices initially rallied on the back of the release, though upside proved short-lived for the S&P 500, topping at a high of 3,894 and stepping beneath pre-announcement levels. A similar whipsaw was seen in EUR/USD, punching to a session peak of $0.9976 before retreating south of the $0.99 figure, leaving behind a ghastly upper candle shadow on the hourly chart. EUR/USD: Daily trendline resistance-turned support on the daily timeframe, extended from the high of $1.1495, remains in the spotlight, evidently under pressure and on the verge of ceding ground. This follows last week’s rejection of daily Quasimodo resistance from $1.0090. Clearing the noted trendline support uncovers a familiar daily Quasimodo resistance-turned support coming in at $0.9753. A break lower is supported by the overall trend: lower since topping in January 2021. Adding to the bearish narrative is the daily chart’s relative strength index (RSI) retesting resistance between 60.00 and 50.00. This places a bold question mark on H1 Quasimodo support from $0.9864, with the unit threatening to push lower today and possibly encourage short-term breakout selling towards H1 Quasimodo support at $0.9826 and possibly the $0.98 region. GBP/USD: It was a similar story for GBP/USD on Wednesday; the currency pair initially staged an advance in the aftermath of the release, spiking to a high of $1.1564 and touching gloves with H1 Quasimodo resistance coming in at $1.1549. As evident from the H1 chart, price dipped under Quasimodo support from $1.1445 in recent trading and is now within a stone’s throw of reaching $1.14 and a neighbouring channel support, taken from the low $1.1503. Breaching the aforementioned levels casts light towards H1 Quasimodo resistance-turned support at $1.1355 and then potentially to $1.13. Technically speaking, recent downside should not be a surprise. The weekly timeframe has price action testing the inside of a decision point at $1.1751-1.1413, alongside the daily chart’s relative strength index (RSI) resistance between 60.00 and 50.00 welcoming the indicator. This is also supported by the dominant downtrend visible on the weekly timeframe since topping at $1.4250 in June 2021. Therefore, going on the above, a break under $1.14 on the H1 scale should not surprise, action perhaps igniting short-term breakout selling in the direction of H1 Quasimodo resistance-turned support at $1.1355 and potentially to $1.13.

The Reserve Bank of Australia will likely hike the cash rate by 25 bps. Mortgage rates in Australia are becoming a problem for households. AUD/USD is at risk of resuming its bearish trend and testing the 0.6300 area. The Reserve Bank of Australia (RBA) will announce its monetary policy decision on November 1, with board members stuck between a rock and a hard place. The Australian central bank hiked the cash rate in every single meeting since May but was the first to slow the pace of quantitative tightening, going for a modest 25 bps hike in October. The latter followed five-consecutive 50 bps hikes. Australian policymakers joined the global tightening train amid spiraling inflation in May, when the benchmark rate stood at 0.1%. The decision to downsize in October resulted from soaring mortgage costs. With rates going from 0.1% to 2.6%, roughly 30% of homeowners started struggling to pay their home loans, according to Finder’s consumer sentiment tracker. But if the RBA wants inflation to return to target, it would need a more restrictive rate. Australian inflation out of control According to the Australian Bureau of Statistics, the Consumer Price Index (CPI) rose by 1.8% in the third quarter of the year, while the annualized pace of inflation hit 7.3%. The Trimmed Mean CPI, which tends to soften the average prices´ increase, rose by 6.1% YoY, the highest reading since the series commenced two decades ago. Finally, like most major central banks, the RBA Board has the mandate to control inflation. Policymakers may keep an eye on a potential recession, but controlling prices is their priority. For the time being,  financial markets anticipate another 25 bps rate hike and one more of the same size in December, although a 50 bps move is still on the table, given the most recent inflation estimates. Either way, the RBA will likely disappoint markets. A surprise higher-than-anticipated hike will lift the risks of a recession, while a conservative one will hardly affect inflation. It is worth adding that the US Federal Reserve (Fed) will meet this week itself to decide on monetary policy. The United States central bank has aggressively tightened its monetary policy, and another 75 bps rate hike is already priced in for this meeting. US policymakers are also expected to pave the way for smaller hikes starting in December. The current interest rate in the US is 3.0%-3.25% and is expected to reach 4.5% by the end of the year. The RBA began later with hikes and kick-started easing the first. The conservative stance is dovish itself, and markets are not expecting a hawkish surprise from Governor Philip Lowe. AUD/USD possible scenarios The AUD/USD pair hovers around 0.6400 ahead of the event. The pair recovered from a 2022 low of 0.6169, reaching 0.6521 before easing. It is currently meeting buyers at around the 38.2% retracement of the aforementioned rally at 0.6385. A break below the latter should favor a slide towards the 0.6300 price zone, where buyers may stand ready to defend the 61.8% retracement. The pair will resume its bearish trend on a daily close below 0.6300. An unexpected bullish surprise could help AUD to resume its bullish run. The first resistance level comes in at 0.6440, followed by the 0.6500 figure. Yet it seems unlikely AUD/USD will strengthen beyond the monthly high ahead of US first-tier events scheduled for later in the week.

AUD/USD Current Price: 0.6387 Australian inflation surged by more than anticipated in October, according to TD Securities Inflation. The Reserve Bank of Australia will announce its monetary policy decision on Tuesday. AUD/USD is technically bearish in the near term, but further slides depend on the RBA. The AUD/USD pair trades in the 0.6380 price zone, falling on Monday for a third consecutive day. The Australian dollar was hit by Chinese figures, as the official NBS Manufacturing PMI fell to 49.2 in October, while the Non-Manufacturing PMI slid to 48.7,  missing the market’s estimates and signaling a steep contraction in business activity. Australian data added pressure on the pair as October TD Securities Inflation surged by 5.2% YoY, higher than the previous 5%. Private Sector Credit, in the meantime, increased a modest 0.7% MoM in September. Finally, the sour tone of global equities maintained the pair on the losing side. Equities eased as global inflation figures show that aggressive quantitative tightening has done little to take price pressures down. Speaking of which, the Reserve Bank of Australia will announce its decision on monetary policy first thing Tuesday. Governor Philip Lowe and co are anticipated to proceed with a modest 25 bps rate hike amid the risk of a recession, although a 50 bps is not completely out of the table. The Australian Consumer Price Index (CPI) rose by 1.8% in the third quarter of the year, while the annualized pace of inflation hit 7.3%. The Trimmed Mean CPI, which tends to soften the average prices´ increase, rose by 6.1% YoY, the highest reading since the series commenced two decades ago. AUD/USD short-term technical outlook The AUD/USD pair is hovering around the 38.2% retracement of its latest daily run measured between 0.6169, the year low, and 0.6521, at 0.6385. The daily chart shows that the pair is also above a mildly bearish 20 SMA, which stands a few pips below the daily low. The longer moving averages keep heading south far above the current level, maintaining the long-term bearish trend in place. In the meantime, the Momentum indicator remains flat above its 100 level, but the RSI indicator already turned south, now standing at around 47. The pair is at risk of falling, according to the 4-hour chart, as the pair trades below bearish 20 and 100 SMAs, both converging with the immediate Fibonacci resistance at 0.6440. Technical indicators, in the meantime, consolidating within negative levels after a failed attempt to advance. The 61.8% retracement of the aforementioned rally provides relevant support at around 0.6305, with a break below it opening the door for a retest of the year low. Support levels: 0.6345 0.6305 0.6270 Resistance levels: 0.6440 0.6495 0.6540   View Live Chart for the AUD/USD