<p style=““ class=“text-align-justify“>The numbers are calculated by market sources, as cited by Reuters. This just adds to the one on Friday as noted <a target=“_blank“ href=“ctober-estimated-to-have-cost-over-5-trillion-20221024/“ target=“_blank“ rel=“nofollow“>here</a>. But if you look at where USD/JPY is trading now (near 149.00), one can easily ask what intervention? ¯_(ツ)_/¯</p><p style=““ class=“text-align-justify“>For some context, Japan’s FX reserves stood at about $1.23 trillion at the end of September, according to official reserves data. So, they definitely still do have plenty of ammunition left but do they really want to keep at this considering how ineffectiveness the latest attempts have been?</p>

This article was written by Justin Low at forexlive.com.

<p class=“MsoNormal“>Gold has been
historically regarded as a safe haven, a backup for fiat currencies, and a
secure asset for the storage of value for many centuries. </p><p class=“MsoNormal“>Nations, investors, and
traders trust the value of gold, not just for its intrinsic & unique
properties as a metal or commodity, but also for its embeddedness in the
cultures and religions of various regions.</p><p class=“MsoNormal“>Throughout the past
century or so, gold has represented an asset which protects investors, corporations,
and countries against inflationary pressures. </p><p class=“MsoNormal“>Time and time again,
the precious metal was used as a hedge against economic recessions and
uncertainty, but this may not be the case in the modern era of volatility, high
inflation and increasing pessimism.</p><p class=“MsoNormal“>As seen in the chart
above provided by Macrotrends, the price of gold relative to the U.S. dollar
has been accelerating exponentially over the last hundred years, especially
since 1975.</p><p class=“MsoNormal“>The grey areas
represent recessions, and it can be noticed that the value of the bullion
propels higher when economies are swimming in calamity. This is because gold is
regarded as an asset which protects against macroeconomic contraction.</p><p class=“MsoNormal“>The Great Recession of
the 1930’s, Dot-com bubble of the early 2000’s, the stock market crash of 2008
and the COVID-19 pandemic are all examples of economic recessions which witnessed
the rise of the precious metal and the fall of dollar-backed assets such as
equities, bonds, and real estate.</p><p>Is Gold Still
a Safe Haven?</p><p class=“MsoNormal“>It’s not very easy to
answer this question. The trajectory of gold has been downward trending since
the start of the year, as can be seen in the chart provided by TradingView.</p><p class=“MsoNormal“>Macropolitical unrest,
growing pessimism and sky-high inflation has swayed investors away from
dollar-backed assets, but gold as well. Typically, investors would go on a gold
rush in times of fear and volatility, and head towards the yellow metal for
safety. </p><p class=“MsoNormal“>Now, in the modern era
of high pessimism and short-lived rallies, investors are skeptical to invest
even in safe havens. The Japanese Yen, a currency regarded as a safe haven as
well, has plummeted to 20-year lows at some point, and still isn’t seeing the
brighter side of day.</p><p>So, what now?</p><p class=“MsoNormal“>Gold is gold, and
bullion fanatics believe in the value and potential of gold as a final resort
when things turn sour. Analysts believe that as markets begin to recover, gold
may witness a surge in value once again.</p><p class=“MsoNormal“>The coalition between
Brazil, Russia, India, China, and South Africa (BRICS) plan to create a
currency backed by gold, which is not linked to the U.S. dollar greenback. It’s
meant to rival the USD amid macropolitical turmoil, and since nations believe
in it, investors and traders will eventually follow suit.</p><p class=“MsoNormal“>It’s the time for gold
to shine, sooner or later. Much of gold’s future direction would depend on what
happens next in the Russia-Ukraine conundrum, China’s initiatives on
‘peacefully’ taking over Taiwan, and how red-hot inflation across many regions
plays out in the coming months.</p><p class=“MsoNormal“>Prepared by team of
Goldenbrokers</p>

This article was written by ForexLive at forexlive.com.

<p style=““ class=“text-align-justify“>It’s all about <a target=“_blank“ href=“https://www.forexlive.com/news/the-start-of-the-central-bank-bonanza-20221024/“ target=“_blank“>key central bank meeting decisions</a> in the next two weeks and after last Friday’s recovery in broader market sentiment, we’re seeing a bit more chop and some pushing and pulling today. But the dollar is standing its ground despite the choppiness, posting a decent recovery after its fall at the end of last week.</p><p style=““ class=“text-align-justify“>S&P 500 futures are back up by 12 points, or 0.3%, after falling by around 23 points earlier in the session. 10-year Treasury yields also moved up from 4.13% to 4.21% only to fall back by 5 bps now to around 4.16% on the day. It looks like we may have to wait for North American traders to really settle the score.</p><p style=““ class=“text-align-justify“>EUR/USD is still down 0.4% to 0.9810-20 levels after sluggish PMI data from Europe earlier as noted <a target=“_blank“ href=“https://www.forexlive.com/news/euro-lacks-comfort-as-pmi-data-highlight-continued-downturn-20221024/“ target=“_blank“>here</a>, while USD/JPY is still looking perky as the bulls brush aside the intervention attempt in Asia.</p><p style=““ class=“text-align-justify“>The low in Asia hit 145.48 before rebounding back to above 149.00 levels at the moment. It looks like the Japanese government will have to <a target=“_blank“ href=“https://www.forexlive.com/news/japan-intervention-on-21-october-estimated-to-have-cost-over-5-trillion-20221024/“ target=“_blank“>burn more cash</a> if it really wants to send a stronger message to markets.</p><p style=““ class=“text-align-justify“>Meanwhile, GBP/USD is also now trading down by 0.2% to 1.1280 at the lows for the day. The pair opened with a gap higher as the pound gained some respite as Boris Johnson bowed out of the race to become the next UK prime minister. The opening levels were around 1.1400 but we look to be headed towards a test of its 100 and 200-hour moving averages at 1.1242-59:</p><p style=““ class=“text-align-justify“>Elsewhere, USD/CAD is up 0.6% to 1.3730 while AUD/USD is down 1.3% to 0.6290 as it runs into a challenge of its key hourly moving averages we well:</p>

This article was written by Justin Low at forexlive.com.

<p class=“MsoNormal“>UPCOMING
EVENTS:</p><p class=“MsoNormal“>Monday: S&P
Global US PMI.</p><p class=“MsoNormal“>Tuesday:
German IFO Survey and US Consumer Confidence.</p><p class=“MsoNormal“>Wednesday:
Australian CPI and BoC Policy Announcement.</p><p class=“MsoNormal“>Thursday: ECB
Policy Announcement and US Q3 GDP Adv.</p><p class=“MsoNormal“>Friday: BoJ
Policy Announcement and US PCE.</p><p class=“MsoNormal“>The last
week was pretty much a mess. Volatility was high and markets were all over the
place. The US Dollar gained and lost, even against the yen after the Japanese
decided to intervene on Friday after days of continuing yen selling. The
intervention came almost exactly one month after the first one. </p><p class=“MsoNormal“>Last time it
offered a great dip buying opportunity as fundamentals didn’t change and the
monetary policy divergence remained solid. One month forward to now and the
fundamentals are still in place, but this time we are near the FOMC meeting and
if the WSJ story is true, looks like Fed officials want to start a less
aggressive approach from December onwards as the risk of overtightening is
making them uncomfortable. </p><p class=“MsoNormal“>There’s also
a good support in the 145.00 area if one wants to fade the intervention again,
otherwise the pair may go to 140.00 if the USD correction intensifies.</p><p class=“MsoNormal“>Overall, the
big picture didn’t change much, inflation is still high, and the core measure
keeps on climbing. As per the inflation nowcast from the Cleveland Fed, we may
see another hot print in the November CPI report and it’s hard to see the Fed
not getting uncomfortable with another hot CPI report. The leading indicators, on
the other hand, keep on printing a bleak picture going forward. Last week the
NAHB Housing Market Index fell more than expected to 38 from the prior 46
reading. The worst of the recession is yet to come. The NAHB index generally
leads unemployment rate by 6-12 months as shown in the picture below.</p><p class=“MsoCaption“ align=“center“>NAHB Index
(inverted) vs. Unemployment Rate</p><p class=“MsoNormal“>This week
the Fed is in blackout period, so we will not hear the same thing again and
again from them until November 2nd when we will get the policy
announcement and Powell’s press conference. Nevertheless, this week we will get
some tier one data and some central bank policy announcements.</p><p class=“MsoNormal“>Monday: We will
get the latest S&P Global PMIs for the US which surprised to the upside the
last time. Such blips are common, but the general trend is for further
deterioration. Although, this indicator is important, the ISM PMIs are
considered the best and most reliable measures and we will need to wait another
week to see those. The market may cheer a bad report with USD under pressure or
get discouraged if the report surprises to the upside and bid the USD. </p><p class=“MsoNormal“>Tuesday: German IFO
Survey is expected to weaken further as the recession coupled with a more hawkish
ECB add to the bleak future. The US Consumer Confidence is expected to weaken a
bit although remains high. This indicator is more correlated with the
employment situation as opposed to the UMich Survey which is correlated with
the financial situation and that explains why they diverged so much. Generally,
when the spread between the two indicators becomes very wide a recession has
followed as you can see in the chart below. </p><p class=“MsoCaption“ align=“center“>Chart by
Michael McDonough (twitter)</p><p class=“MsoNormal“>Wednesday: We will
see the latest CPI report for Australia. The Q/Q measure is expected to cool to
1.6% from 1.8% but the Y/Y measure is seen picking up to 7.0% from the prior
6.1%. The RBA favoured data, the Trimmed Mean figures, are seen matching the
prior for the Q/Q at 1.5% but the Y/Y is expected to rise to 5.6% from 4.9%. The
RBA surprised last time with a lower-than-expected hike, which contributed to
create a policy divergence between the RBA and RBNZ and resulted in AUD/NZD
falling for several pips. A surprisingly hot CPI may make the market to expect
the RBA to revert back to a more aggressive stance.</p><p class=“MsoNormal“>The Bank of
Canada is expected to hike by 75 bps in wake of the latest hot Core CPI report
and the recent commentary from Governor Macklem saying that if the CAD
depreciation against the Dollar persists, they will have to do more work on
interest rates. The problem is that even if the BoC hikes more than the Fed,
the global recession favours the USD anyway, so for USD/CAD to reverse the
general upward trend we need to see the Fed to reverse course, which is not expected
for 6 months at very least. </p><p class=“MsoNormal“>Thursday: As
inflation in EZ continues to advance the ECB is seen to hike rates again by 75
bps. ECB members already signalled this move and more to come in the next
“several meetings”. The ECB is also expected to begin QT sometime in Q2 2023
(doubt they will be able to do that when things will be much worse by then).
The market sees the peak rate in late Q2 at around 3%. It’s been kind of a
pattern fading the ECB event with an almost 100% success rate, although some
were better than the others in terms of follow through action. This is of
course because no matter what the ECB does, the recession will be bad, and the
USD is favoured in a global recession. In the chart below you can see the ECB
policy decisions and how the EUR/USD pair is trading cleanly in the downward
channel. </p><p class=“MsoNormal“>We will also
see the US Adv. Q3 GDP report, which is expected to show a 2% annualised growth
after two consecutive negative prints, which triggered a technical recession
talk. Generally, GDP isn’t a market mover as it’s a very lagging indicator. </p><p class=“MsoNormal“>Friday: The BoJ is expected to keep monetary policy
unchanged with rates at -0.10% and QQE with Yield Curve Control (YCC) to
flexibly target 10yr JGBs at around 0% with 0.25% as the ceiling. Inflation in
Japan remains much lower than the other advanced economies and it’s not adding
any pressure to the central bank. The BoJ may even get away with its policy as
the global recession intensifies and price pressures recede. </p><p class=“MsoNormal“>US PCE
hasn’t been a market mover as the market is focused on the timelier CPI report.
The headline PCE Y/Y is expected at 5.8% down from the prior 6.2% and the M/M
reading is seen at 0.5%, up from the prior 0.3%. The Core measures are expected
at 5.2% for the Y/Y figure, up from the prior 4.9% and the M/M reading is seen
at 0.5%, down from the prior 0.6%. </p><p class=“MsoNormal“>This article
was written by Giuseppe Dellamotta.</p>

This article was written by ForexLive at forexlive.com.

<p style=““ class=“text-align-justify“>This, according to a source from her campaign as cited by Reuters. Either way, it seems like Sunak is the heavy favourite at the moment after Boris Johnson bowed out earlier. From this morning:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/sunak-now-favourite-to-be-new-uk-pm-after-bojo-bows-out-20221024/“ target=“_blank“>Sunak now favourite to be new UK PM after BoJo bows out</a></li></ul>

This article was written by Justin Low at forexlive.com.

<p class=“MsoNormal“>This week will start
with some PMI surveys in the eurozone and the flash services PMI in the U.S. on
Monday, followed by the core CPI y/y in Japan and the CB consumer confidence
for the U.S. on Tuesday.</p><p class=“MsoNormal“>Wednesday will be a
busy day with the CPI q/q and trimmed mean CPI q/q prints in Australia; the
monetary policy report, overnight rate and BOC press conference in Canada; and
the new home sales data for the U.S. On Thursday, the main event will be the
ECB press conference and main refinancing rate and in the U.S. all eyes will be
on the unemployment claims.</p><p class=“MsoNormal“>The week will finish
off with the BOJ press conference and policy rate on Friday, along with the
core PCE price index m/m in the U.S.</p><p class=“MsoNormal“>The Q3 CPI q/q in
Australia is likely to print lower to 1.6% from 1.8% the previous quarter, but
the y/y rate is expected to run hot — 7.0% from 6.1%.</p><p class=“MsoNormal“>In Canada, the
consensus according to the Reuters survey was that the BOC will hike rates by
50bps, but the survey was conducted before the latest CPI data surprised on the
upside. Because of the new data, some analysts now expect the Bank to deliver a
rate hike by 75bps, which according to Scotiabank, has more or less been priced
in. Analysts will be watching this meeting for any clues about future rate
hikes.</p><p class=“MsoNormal“>In the U.S. the new
home sales are expected to see some slowdown due to high mortgage rates. The
housing market has been negatively impacted by rising rates overall and will
likely see further decline in the near future, despite a 30% increase in new
home sales in August, which was more likely a temporary relief from the overall
market downtrend. On Friday we will also get the data for pending home sales
which will provide clues about the demand conditions. </p><p class=“MsoNormal“>The ECB is expected
to hike the rate by 75bps this week and the market has already priced in an 80%
possibility. The economy in the euro area faces many challenges due to the
rising energy and commodity prices so the outlook for the euro is not very optimistic.
The ECB seems to be committed to fighting inflation despite the economic
condition and President Lagarde said that hikes will be spread out over the
next several meetings.</p><p class=“MsoNormal“>ING analysts believe
it’s too early to talk about Quantitative Tightening (QT) but said „the
Bank will seek to mop up bank liquidity.“ The analysts think the things to
watch for in this ECB meeting are: the excess liquidity, quantitative
tightening and the terminal rate.</p><p class=“MsoNormal“>No change is expected
at this week’s BOJ meeting and it’s clear that the Bank will leave FX
intervention in the government’s hands. The Bank will likely maintain the QQE
with Yield Curve Control to flexibly target 10yr JGBs at around 0%. The Bank’s
Outlook Report will also be released which will contain its members‘ forecasts
for the Real GDP and Core CPI and the expectation is that the CPI will increase
from the previous forecast of 2.3%.</p><p class=“MsoNormal“>In the U.S., the
personal consumption expenditures (PCE) — the Fed’s favourite inflation gauge
— is likely to rise. Wells Fargo expects PCE to rise at a 0.8% annualized pace
for the third quarter, up from the previous 0.6%. An increase in consumption
would translate to import growth as well. Equipment spending is expected to be
strong, but residential investment likely took a hit due to the higher mortgage
rates.</p><p>USD/CAD
expectations</p><p class=“MsoNormal“>The pair closed the
week near the 1.3605 level of support. The CAD strengthened on Friday against
the USD, but overall, on the H1 chart the pair lacked a firm direction, but
rather moved in a range between 1.3650 and 1.3840. For this week it’s likely
we’ll see some choppy moves as well. </p><p class=“MsoNormal“>A risk for this pair
will be the BOC meeting and the U.S. GDP data for Q3. Expectations for the GDP
are encouraging as the consensus is for 2.1% SAAR. Strong data will support the
USD. </p><p class=“MsoNormal“>On the H1 chart the
next levels of support are at 1.3605 and 1.3500. A move below 1.3500 likely
opens the path for some depreciation. On the upside we have the levels of
resistance at 1.3705, 1.3835 andthe 1.3970. </p><p class=“MsoNormal“>This article was written by Gina
Constantin.</p>

This article was written by ForexLive at forexlive.com.

<p style=““ class=“text-align-justify“>The cost of the intervention on Friday last week is said to be around ¥5.4 trillion to ¥5.5 trillion. That’s roughly $36 billion and you would think that they probably spent quite a bit more on that today as well.</p>

This article was written by Justin Low at forexlive.com.

<p>Chinese President Xi Jinping wrapped up the People’s Congress with a power move that vanquished his rivals and humiliated his predecessor.</p><p>The moves leave no doubt that he personally consolidated power at the event, which takes place every 5 years. It was already widely expected that he would be confirmed for another 5-year term — his third — but there were questions about how much influence reformists promoted by predecessor Hu Jintao would retain.</p><p>The answer: Virutally none.</p><p>Rivals Li Keqiang and Wang Yan were left off the policy setting Central Committee and ushered into retirement. But the coup-de-grace was a humiliating exit of Hu. There have long been reports that the 79-year-old Hu is in poor health, possibly suffereing from dementia, but to wait until after media were invited in only to escort him out was surely a power move.</p><p>Watch for yourself:</p><blockquote class=“twitter-tweet“><p dir=“ltr“ lang=“en“>Early drama: Hu Jintao seen being led out soon after reporters are led into the main hall <a target=“_blank“ href=“https://t.co/pRffGZF60I“>pic.twitter.com/pRffGZF60I</a></p>— Danson Cheong (@dansoncj) <a target=“_blank“ href=“https://twitter.com/dansoncj/status/1583663702896967680?ref_src=twsrc%5Etfw“>October 22, 2022</a></blockquote><p> As Iam Bremmer put it, here is the message:</p>

This article was written by Adam Button at forexlive.com.

<p>MON: EZ/UK/US Flash PMIs (Oct)TUE: NBH Announcement, German Ifo Survey (Oct), US CaseShiller (Oct)WED: BoC Announcement, BCB Announcement, Australian CPI (Q3), US Adv Goods Trade BalanceTHU: ECB Announcement, South Korean GDP (Q3), German GfK Consumer Sentiment (Oct), German Flash CPI (Oct), US GDP Adv (Q3) and PCE (Q3)FRI: CBR Announcement, BoJ Announcement, Japanese Jobs Report (Q3), Australian PPI (Q3), German Flash GDP (Q3), EZ Sentiment Survey (Oct), US PCE (Sep)</p><p>NOTE: Previews are listed in day-orderTORY LEADERSHIP RACE: Following the resignation of Truss as PM after just 44 days in office, an accelerated leadership contest to appoint a new Conservative leader and by extension PM has been called. In an effort to have a new leader in place before the October 31st budget, an event that is itself a point of uncertainty, the format is slightly different to the usual process. Around 14:00BST on Monday, the first and potentially only round of voting will occur with the threshold to progress set at 100/357; as such, only a maximum of three candidates can progress to this point. If there are three candidates, Tory MPs will hold a knockout vote with the MP receiving the fewest votes eliminated. Either way, when it is whittled down to two members this is put to an online ballot of broader Conservative members to determine the next PM, results expected Friday. For reference, if only one candidate gets 100 backers, then they are immediately declared PM. As it stands, it looks like it is going to be a contest between Boris Johnson, Rishi Sunak and Penny Mordaunt; though, bear in mind no candidate has officially declared they are standing just yet. For reference, bookmakers have Sunak in the lead while Johnson is seen as the favoured candidate among grassroots members.EZ FLASH PMIS (MON): Expectations are for the manufacturing metric to fall to 48.0 from 48.4, services to drop to 48.2 from 48.8, leaving the composite at 47.6 vs. prev. 48.1. The prior report saw the composite PMI decline to 48.1 in September from 48.9 in August. Accordingly, S&P Global noted that “Business activity has now deteriorated for three successive months, indicating falling GDP, with the rate of decline gathering momentum over the third quarter”. This time around, analysts at Investec note that “there has been little in the way of major developments to reverse the current sentiment. As such we expect October’s PMI to remain in contractionary territory, in line with our view that the eurozone is in for a difficult winter, with a mild recession our central case”. From a market perspective, the release will likely play second-fiddle to the ECB policy announcement later in the week which is expected to see policymakers pull the trigger on an additional 75bps hike (see below for further details). That said, a markedly weak report could see traders dial back some expectations for action from the ECB later in the year and early 2023 as the harsh reality of a tough winter for the bloc becomes more visible in the data.UK FLASH PMIS (MON): Expectations are for the services metric to fall to 49.0 from 50.0, manufacturing to weaken to 47.9 from 48.4, leaving the composite at 48.2 vs. prev. 49.1. The prior report saw the composite metric fall to 49.1 from 59.6 with S&P Global noting that „September data highlighted an absence of growth in the UK service sector for the first time in 19 months as the energy crisis continued to hit business and consumer spending”. The October release is not expected to provide much in the way of encouragement given the political turmoil seen in the wake of ex-Chancellor Kwarteng’s “mini-budget” which prompted a surge in borrowing costs. Although some of the impact of this was mitigated following the appointment of Jeremy Hunt as Chancellor who essentially tore up Kwarteng’s plans, concerns remain over political stability in the UK and public finances amid a GBP 40bln hole that needs to be plugged. From a policy perspective, the BoE is widely expected to deliver a 75bps hike at its November 3rd meeting following Chancellor Hunt’s fiscal plan due on October 31st (this could be pushed back amid the ongoing Conservative leadership contest). Given the gravitas of these two events, any traction in UK assets following the PMI release is likely to be fleeting.NBH ANNOUNCEMENT (TUE): The NBH is expected to keep its Base Rate unchanged at 13.00%, after hiking by 125bps in September vs the split consensus between 75bp and 100bp heading into the gathering. October’s decision is expected to be unchanged following guidance from the NBH after the last meeting that it has concluded the tightening cycle and policy can be held for a prolonged period as the Bank turns its attention to liquidity and transmission. The subsequent minutes made clear that the decision to keep the Base Rate on hold following September’s hike had the full support of rate-setters, in keeping with the unanimous decision to end with a 125bp hike. Since then, the Bank has undertaken liquidity-draining operations – a narrative that will be in focus for the upcoming meeting for guidance around the intended scope of such action.BOC ANNOUNCEMENT (WED): The Bank of Canada is expected to hike rates by 50bps at its October meeting, according to the latest Reuters survey, which was conducted before the September CPI data. Money markets, in wake of CPI, are now leaning towards a 75bp hike with a 70% probability – so it is a close one for either a 50bp or another 75bp hike. The Economists surveyed by Reuters saw 27/30 expect a 50bp hike while the remaining three expect a 75bp hike. The latest CPI data was hotter than expected on all fronts with Y/Y rising 6.9% (exp. 6.8%) but decelerating from the prior 7.0% while the M/M rose 0.1%, hotter than the expected unchanged print. The Core Y/Y rose 6.0%, accelerating from the prior 5.8% while the M/M rose 0.4%, accelerating from the unchanged reading in August. The average of the BoC-eyed measures also ticked up. The inflation report saw a hawkish move in market pricing with Canadian interest rate futures now implying a 75% chance of a 75bp hike next week, vs a 30% probability before the hot inflation. Recent commentary from Governor Macklem noted if the recent CAD depreciation against the Dollar persists, we are going to have to do more work on interest rates. Looking ahead, the terminal rate is expected to reach 4.25% in Canada, up from the prior 3.50% in the prior Reuters poll with nearly all respondents saying risks are skewed towards a higher peak rate. However, since the inflation data, money markets are currently pricing a peak rate of around 4.50% in April, up from the prior 4.33% ahead of the data. It is also worth noting the Fed is widely expected to hike by another 75bps in November, and given Macklem’s commentary on the FX rate, coupled with rising inflation expectations in the BoC Business Outlook survey, and hot inflation data, the argument has been building for a 75bp hike. ING also suggests a further 75bp hike, given the upside in inflation, is the most likely outcome. However, it is worth highlighting the latest business outlook survey was quite somber, noting business confidence has softened and most think a domestic recession is likely within 12 months while many are expecting slower sales growth as rates increase and demand slows.BCB ANNOUNCEMENT (WED): The Brazilian Central Bank is expected to maintain the Selic Rate at 13.75% again. The last meeting saw the Bank keep rates unchanged, however the vote was not unanimous and was a 7-2 split decision, with the two dissenters opting for a 25bp hike. The decision to keep rates unchanged reflected uncertainty about scenarios for prospective inflation, higher than usual variance in the balance of risks and as it „is consistent with the strategy for inflation convergence to a level around its target throughout the relevant horizon for monetary policy, which includes 2023 and, to a lesser extent, 2024″. The statement also saw the BCB note that it will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. Analysts at Credit Suisse look for the rate to be unchanged and for the Bank to put emphasis on the guidance that leaving the rate unchanged is consistent with inflation returning to target, while it also expects the BCB to maintain language about its readiness to resume tightening if required. Looking ahead, the desk sees the Selic Rate at 13.75% until September 2023, falling to 11.50% by end-2023 and 8.5% at the end of 2024. However, it acknowledges this outcome depends on the fiscal framework by the next administration with the runoff election due at the end of the month.AUSTRALIAN CPI (WED): Q3 CPI Q/Q is expected to cool to 1.6% from 1.8%, but the Y/Y rate is expected to pick up to 7.0% from 6.1%. In terms of the Trimmed Mean figures, Q/Q is seen matching the prior quarter at 1.5%, but the Y/Y measure is expected to rise to 5.6% from 4.9%, whilst the Weighted Mean Q/Q is expected at 1.5% vs the prior 1.4%, and the Y/Y at 4.9% against the previous quarter’s 4.2%. The release also comes amid the recent introduction of the monthly CPI metrics by the ABS, and although desks suggest there are some issues with converting the monthly metrics to a quarterly print, it is the closest guide. For example, desks suggest electricity prices are only measured in the last month of each quarter, thus the Monthly CPI Indicator will not provide an update on electricity prices. Westpac believes “This is a significant issue in September due not just to the reported significant increase in power bills but also the various state government electricity rebates…Without the rebates we estimate electricity prices would have lifted a bit more than 8% in the quarter contributing 0.22ppt to the CPI.” The Bank expects a 1.1% Q/Q reading for the September quarter with the Y/Y at 6.5%.ECB ANNOUNCEMENT (THU): With headline Y/Y HICP in September advancing to 9.9% from 9.1% and the core metric rising to 6.0% from 5.5%, policymakers are set to deliver another outsized rate hike following a 75bps increase in September. According to a Reuters survey, 27/36 expect the Deposit Rate to be raised by a further 75bps to 1.5%, 7/36 look for 50bps and just 2/36 forecast 25bps. In terms of market pricing, a 75bps hike is priced at around 80% and a 50bps increase at 20%. Beyond inflationary developments, growth concerns are continuing to mount in the Eurozone with the composite PMI metric declining to 48.1 in September from 48.9 in August. Accordingly, S&P Global noted that “Business activity has now deteriorated for three successive months, indicating falling GDP, with the rate of decline gathering momentum over the third quarter”. Nonetheless, with the ECB’s 5y5y inflation expectations measure rising to around 2.3% from circa 2.2% at the time of the prior meeting, policymakers will be forced to raise rates again this month with President Lagarde recently noting that hikes will be carried out over the course of the next “several meetings”. In terms of other measures to be mindful of, source reporting on 13th October suggested that the GC discussed the timeline for the balance sheet reduction at the Cyprus meeting earlier this month. The report noted that the language regarding reinvestments could be tweaked at the October meeting, before outlining plans for a balance sheet reduction in December or February and then commencing QT sometime in Q2 2023. Elsewhere, the upcoming meeting could see policymakers alter the terms of its TLTROs given that banks can currently park cash from operations at the ECB and earn a risk-free profit following recent rate hikes. Market participants will also be looking for how committed to further rate hikes the Bank is given recent reporting suggesting that an ECB staff model puts the target-consistent terminal rate at 2.25%. That said, the report noted that policymakers were sceptical over the accuracy of the model. As a guide, markets currently see the peak deposit rate at around 3% by late Q2/early Q3 next year.CBR ANNOUNCEMENT (FRI): The Russian Central Bank is expected to hold rates at 7.5% at its October policy meeting, following a 50bps cut last time when the accompanying statement no longer mentioned further rate reductions. Further within the prior release, CBR said inflation expectations of households and price expectations of businesses remain elevated, which has since been reiterated by the Deputy Governor as has the annual inflation forecast of 11-13% in 2022. Since the last meeting, the Deputy Governor has noted the decline in inflation may now be slower than previously thought, but the neutral rate remains at 5-6%, something which Governor Nabiullina echoed in wake of the meeting. Looking ahead, the CBR official noted the central bank will make further rate decisions based on the economic situation and balance of risks, and it will refine forecasts in October with an improved GDP estimate. Further on inflation, the government decided to bring forward the hike in utility prices for households to December ‘22 from July ‘23, doubling the size of the indexation to ~9%, and as such JPMorgan thinks “this should add around 0.6%-pt to CPI by the end of the year and might have marginal secondary effects through higher cost inflation and higher inflation expectations.” As a result, JPM lifted its year-end inflation forecast to 12.9% from 12.0% previously.BOJ ANNOUNCEMENT (FRI): The Bank of Japan is widely expected to maintain its monetary policy settings next week with the central bank likely to keep rates at -0.10% and stick to QQE with Yield Curve Control to flexibly target 10yr JGBs at around 0%. The central bank will also release its latest Outlook Report containing board members’ median forecasts for Real GDP and Core CPI, which the Japanese press noted will include an increase in the current fiscal year CPI forecast to the high-end of 2% from the prior 2.3% view. However, rhetoric from the BoJ firmly suggests an unwillingness to tighten policy as Governor Kuroda has stated that the pace of Japan’s economic recovery is still slow so the BoJ must continue supporting the economy and that raising rates now is inappropriate in light of economic and price conditions. BoJ’s Adachi also recently warned that they must be cautious about shifting towards monetary tightening as downside risks to the economy are increasing and such a shift would weaken demand and heighten the risk that Japan will revert to deflation, while the central bank’s decision to extend its pandemic relief program at the last meeting also attests to the BoJ’s lack of appetite for normalisation. The latest key data releases add to the case for maintaining easy monetary policy as the BoJ’s quarterly Tankan survey showed sentiment amongst large manufacturers worsened, while Machinery Orders and Household Spending also disappointed. Conversely, inflation remains above the 2% target and recently printed its highest since 2014 at 3.0%, but is unlikely to trigger a policy reaction as the central bank has acknowledged that price increases are being driven by rises in energy costs and raw materials, as well as anticipating inflation to slow down to below target levels during the next fiscal year once the impact of energy and fuel costs begin to wane. Furthermore, the recent rapid depreciation in the JPY is unlikely to spur an adjustment to monetary policy with the central bank seemingly comfortable to leave FX intervention to the government, while it even upped the amounts of its bond purchases and conducted unscheduled operations to defend its yield cap which is further evidence of its unwavering dovish stance.</p><p>This article originally appeared on Newsquawk. <a target=“_blank“ href=“https://newsquawk.com/?utm_source=forexlive&utm_medium=research&utm_campaign=partner-post&utm_content=weekly“ target=“_blank“ rel=“nofollow“>Get a 7-day free trial</a>.</p>

This article was written by Newsquawk Analysis at forexlive.com.

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This article was written by Adam Button at forexlive.com.