23.10.23 - 27.10.23
Results of the previous week
US indices were mostly under pressure last week due to a less-than-optimistic reporting season. Some major companies are underperforming in key areas. On top of that, the positive US GDP data enhance fears that the Fed will resume rate hikes if it needs to.
In the forex market, the US dollar strengthened against the euro, the pound and the yen. The euro came under pressure amid the European Central Bank's decision to keep its interest rate unchanged. The European economy's weakening was the reason behind the decision. Expectations for the state of the German economy, the largest in the monetary bloc, hurt the euro.
Brent oil prices were down early this week. The downward momentum's development was held back at 86.70, which prices stayed above for the rest of the week. Oil is under pressure amid concerns about China's demand for it after the country proposed limiting domestic oil refining to fight carbon dioxide emissions. Positive data on US GDP supported the price of oil.
Key events of the current week
Germany. GDP growth rate
Germany's economy is facing some serious challenges. The PMI in key sectors is in a downtrend. Furthermore, the changes in supply chains are contributing to the economy's cooldown. High energy prices and ECB rates are preventing growth. All these factors have triggered the emergence of an economic recession. According to global analytical agencies' forecasts, no changes are expected yet. Germany's GDP continues to fall. That's bad news for the euro, resulting in EUR/USD moving toward 1.0455..
US Fed rates decision
US inflation is rising again. The latest data indicate that it has hit an annualised rate of 3.7%, despite the US Fed raising its key interest rate to its highest point since 2001. Such price pressure dynamics are bringing back fears that the regulator will resume its monetary policy tightening. According to CME Group, there's a 99.5% chance that the rate will remain unchanged at the Fed's next meeting. However, there have already been comments from the regulator's representatives that the interest rate will stay high for longer than expected and will be raised if necessary. The state of the economy, however, doesn't prevent further tightening. As such, the regulator's hawkish rhetoric supports the dollar and puts pressure on metals,i.e., gold. In this scenario, XAU/USD may fall to somewhere around 1,970.00.
Bank of England rates decision
The UK's inflation is gradually retreating, but it's still way above the target level set by the regulator. At the same time, the country's economy is raising certain concerns and leading the Bank of England to avoid pushing a further tightening of monetary policy. Global analysts forecast that the rate will be kept unchanged at the November meeting. And it is negative for the British pound. If the regulator's decisions meet expectations, GBP/USD will test the support level of 1.2060.If it breaks through that level, it will continue to decline to 1.2000.