The global economy is facing a dynamic mix of cooling inflation, central bank rate cuts, earnings surprises, and heightened political risks. Here’s a closer look at the economic and geopolitical developments that are shaping the weekly outlook:

Inflation and Central Bank Policies

As inflation shows signs of easing in several major economies, central banks in developed regions adjust policies. Rate cuts continue to dominate, particularly in Europe and North America. In the United States, retail sales data came in above expectations, and the labor market remains robust. Earnings reports from companies across sectors have also delivered positive surprises, bolstering market confidence.

However, in China, despite better-than-expected sales and industrial output figures, the economy missed its growth target for Q3, with GDP growth below estimates. This fuels concerns about sustained economic momentum in the world’s second-largest economy.

Over in Europe, the European Central Bank (ECB) has responded to rapidly falling inflation by cutting rates. However, with growth still sluggish, there are growing concerns about the continent’s ability to recover quickly. The ECB is balancing inflationary control with the need to stimulate economic activity.

Geopolitical Events and Natural Disasters

Beyond economic data, several geopolitical and political developments are worth watching:

• US Elections: As the election campaign gains momentum, uncertainty is mounting. Betting markets are increasingly favoring Donald Trump, creating potential volatility as his policies differ sharply from those of the current administration.
• Middle East Tensions: The Israel-Iran situation continues to escalate. Israeli Prime Minister Benjamin Netanyahu is signaling serious intent to attack Iran, with military action likely once Israel’s religious holidays conclude this week. This development comes despite multiple countries attempting to mediate between the two sides.
• Ukraine War: In Ukraine, Russia continues to make slow advances, despite heavy resistance. The ongoing war remains a critical source of geopolitical risk for European and global stability.
• Natural Disasters: The US is grappling with the aftermath of Hurricanes Helene and Milton, which have caused widespread social, environmental, and economic disruption. The full impact of these disasters is still being assessed, but recovery will likely take time, with significant resource allocation required for rebuilding efforts.

Looking ahead, the upcoming week promises a packed schedule with economic reports, corporate earnings, and political developments. Investors will be closely watching also the BRICS meeting in Russia.

16th BRICS Summit: Key Global Event to Watch

The 16th BRICS Summit is set to take place on October 22–24, 2024, in Kazan, Russia. This year’s summit will be particularly significant, as BRICS—comprising Brazil, Russia, India, China, and South Africa—recently expanded by inviting Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE) to join as new members. This move, announced in January 2024, reflects BRICS’ growing influence and its ambition to challenge the dominance of wealthier nations and international institutions like the G7.

This summit comes at a pivotal time, with Russia and Iran—two key BRICS members—directly involved in wars. Russia is entrenched in its conflict with Ukraine, while Iran faces heightened tensions with Israel. These geopolitical issues will likely influence the tone of discussions and may bring about crucial diplomatic developments.

Furthermore, China, the largest economy in BRICS, is dealing with its own set of challenges, including slowing economic growth, trade tensions, and domestic issues that are affecting its global stature. How China navigates these challenges will be crucial for the overall cohesion and future trajectory of BRICS.

The summit is expected to focus on:

• Economic Collaboration: Strengthening trade partnerships among members and exploring alternative payment systems to reduce reliance on the US dollar.
• Energy Security: With key energy exporters like Saudi Arabia and the UAE joining BRICS, discussions on energy production and prices will be high on the agenda.
• Geopolitical Strategy: Coordinating responses to Western sanctions, particularly in light of Russia and Iran’s ongoing geopolitical conflicts.

Given the diverse economic and political backgrounds of the new and existing BRICS members, the summit will be a critical platform to determine how the group will assert itself as a major player in shaping the future of global governance.

This week’s BRICS summit is one to watch closely, as it could mark a turning point in the global balance of power, amid significant geopolitical and economic uncertainties.

U.S. Dollar and Wall Street Update

In September, the U.S. economy exhibited mixed signals, reflecting both resilience and challenges across key sectors. Retail sales exceeded expectations, rising by 0.4%, driven by broad-based consumer strength. However, industrial production declined by 0.3%, primarily due to the Boeing worker strike, Hurricane Helene, and preparations for Hurricane Milton, which collectively subtracted 0.6% from output. Capacity utilization fell to 77.5%, its lowest level since January.

Residential construction also weakened in September, with housing starts dropping by 0.5% to an annual pace of 1.354 million units. Building permits, which indicate future construction activity, declined by 2.9%, largely due to a sharp reduction in permits for multifamily properties. While multifamily construction tends to be volatile, single-family home building permits remained strong, up 9.8% year-to-date.

Despite these sectoral fluctuations, the Federal Reserve’s tightening policy continues to exert pressure on interest-sensitive sectors. While Treasury yields and mortgage rates have slightly decreased as monetary policy begins to ease, borrowing costs remain high compared to pre-pandemic levels. The Fed is expected to continue lowering its target range for the federal funds rate, with growth in interest-sensitive sectors anticipated to strengthen by mid-2025.

Week Ahead in the US: Key Economic Data to Watch

The upcoming week in the US features important economic releases that will shed light on various sectors, from housing to manufacturing. We expect the week to start with another weaker LEI number.

The US Leading Economic Index (LEI) will be published on Monday. Following a 0.2% drop to 100.2 in August, we predict the LEI will decline by 0.3% for September. This long-term decline, which began in early 2022, has been largely driven by the Federal Reserve’s interest rate hikes. However, with plans to cut rates in the coming months, we expect the LEI to begin improving next month.

Thursday will be a busy day with several key data releases. S&P Global PMIs for October will be published. We expect to see a slightly weaker manufacturing PMI below the 50 expansion level, while the services sector is expected to maintain its strength, with a reading around 54. Additionally, housing market data will be released. In August, new home sales dropped by 4.7%, reaching a 716K annualized rate. Despite this dip, sales have risen 9.8% over the past year, supported by ample inventory. For September, we anticipate a slight decline in new home sales to 710K units. However, with improving builder confidence and marginally lower mortgage rates, the expected easing of the Fed’s rate policy should continue to benefit the new home market in the months ahead.

Finally, on Friday, Durable Goods Orders—one of the key economic indicators—are expected to show a mixed picture of the US economy. Recent orders have been volatile, largely due to fluctuations in aircraft demand. In August, overall orders were flat, but core durable goods (excluding transportation) rose by 0.5%, supported by strong demand for computers and electronics. While the Fed’s easing cycle should eventually boost the production sector, we do not expect an immediate uptick in results. For September, we forecast a modest 0.5% gain in headline durable goods orders, mostly driven by aircraft, while core orders (excluding transportation) will likely increase by just 0.1%, slower than August.

The economic data for the coming week continues to reflect a slight underlying uptrend in the US economy. While consumer demand remains resilient, interest-rate-sensitive sectors such as housing and manufacturing face ongoing challenges. The anticipated easing of the Fed’s monetary policy may help boost sectors like durable goods and housing, but its full effects are expected to materialize in 2025.

On Wall Street, aside from the economic data, earnings reports will also be in focus. After last week’s mostly positive results, we expect continued positive outcomes that could support the main indices. Some key tickers to watch include TSLA, K, IBM, and NEE.

While fundamental data (excluding geopolitical tensions) is supporting stock prices, technically, the S&P 500 is signaling a correction after printing several all-time highs in recent weeks. The RSI is moving lower from the overbought area, and OBV (On-Balance Volume) is creating lower highs despite higher price highs. We can identify support levels at 5,808 and 5,755. If the price breaches below these, 5,676 may be the next stop.

On the currency front, the U.S. dollar’s movement in recent weeks has been closely tied to the Federal Reserve’s monetary policy stance. In addition to economic data, we must closely monitor FOMC members’ speeches in the week ahead. Economic data has been exceeding market expectations, which further supports the dollar’s strength. On the other hand, despite market anticipation of two rate cuts by year-end, Fed policymakers have expressed doubts, reinforcing the dollar’s position.

Beyond economic data, persistent geopolitical risks—such as uncertainty around the upcoming U.S. elections and heightened U.S.-China trade tensions, particularly regarding further restrictions on microchip exports—remain significant. These factors could drive demand for safe-haven assets like the dollar.

From a technical perspective, similar to the S&P 500, the DXY (Dollar Index) is also signaling a possible correction, with the RSI falling back toward the 50 level. The next support levels are 103.00 and 102.56. If these levels are breached, we may see 100.20 as the next target, though this is less likely in the current market environment.

CAD and BoC

The Bank of Canada (BoC) is set to announce its monetary policy decision this week on Wednesday. Analysts anticipate a significant easing, with expectations for a 50 basis point (bps) rate cut, as both inflation and economic data support the idea of further cuts.

Canada’s current inflation landscape backs this move. September’s headline inflation fell below the central bank’s target of 2%, while more detailed data show that service inflation is at its lowest pace in a year, and core inflation metrics have stabilized within a 2% to 2.5% range. On the economic activity front, recently published data confirm weaker economic growth and the need for more support. Given the mentioned inflation and economic data, along with the prevailing restrictive stance and the upcoming release of updated economic projections, we expect the Bank of Canada to implement a 50 bps cut, lowering the policy rate to 3.75%, which is very close to its neutral rate range of 2.25% to 3.25%.

Regarding the Loonie, the BoC’s monetary policy will be the primary driver for the CAD in the coming week. The anticipated 50 bps cut could put additional pressure on the CAD against its crosses. Should the BoC fail to deliver the expected rate cut or indicate additional easing, it could provide support for the Loonie, contradicting market expectations and prompting a repositioning; however, this scenario is less likely.

In line with the Bank of Canada’s meeting, CAD traders must also monitor the upcoming release of Canada’s Producer Price Index (PPI) rates and August retail sales data. However, these reports may be overshadowed by the BoC’s interest rate decision on Wednesday. From a fundamental standpoint, the BoC’s upcoming decision is critical for the Canadian dollar and is expected to pressure the Loonie in the near term. From a technical perspective, we also expect to see USDCAD continue its current bull run, moving toward 1.38 and then 1.39 as the next target in the short term.

Gold and Aggregation of Risks

Despite a strengthening U.S. dollar and higher stock prices, gold continues to gain momentum, surpassing $2,700 per ounce. While expectations for larger rate cuts by the Fed are fading, other central banks continue to cut rates. Generally, expectations of global rate cuts and escalating geopolitical tensions in the Middle East can still support gold as a buy, even though it is technically overbought.

In recent weeks, we have discussed gold’s bull run and the potential for higher prices. For the week ahead, geopolitical tensions, particularly the threat of an Israeli strike on Iran, could keep risks elevated. Additionally, the killing of Hamas Political Bureau leader Yahya Sinwar and the masterminds behind the October 7 attacks have raised expectations of further escalation in the Middle East conflict.

Furthermore, as the U.S. election approaches, uncertainty in the markets is likely to increase, which could boost gold’s demand as a safe-haven asset. This could be another reason for the continued growth in gold prices.

From a technical perspective, while gold is in an overbought area, technical indicators still support the bulls. Immediate support is at $2,700, followed by $2,685 and $2,673. Bulls are targeting $2,750, with movement above $2,725 signaling potential upward momentum.

Oil: Wandering Between Economists and Politicians

Last week, we received the monthly energy reports, and both OPEC and the International Energy Agency (IEA) gave a negative outlook for oil prices, signaling lower demand for 2025 compared to their estimates from the previous month. The same expectation was shared by the IEA in its latest short-term energy outlook.

On the other hand, U.S. energy inventories showed a shortfall after two consecutive weeks of increases. The U.S. Energy Information Administration (EIA) reported a decrease of 2.191 million barrels for the week ending October 11, missing the forecast of a 2.3 million barrel increase. This follows a 5.810 million barrel increase the previous week. A day earlier, the American Petroleum Institute (API) also reported a decline of 1.580 million barrels, significantly below the forecasted 3.2 million barrel increase, following a prior surge of 10.9 million barrels.

These figures suggest tighter crude oil inventories and a mild undershoot in natural gas storage, which could influence market prices and the supply outlook in the near term. Inventory reports were positive for prices, but monthly energy reports failed to provide enough support for a price increase.

On the geopolitical front, there have been reports that Israel may launch an attack ahead of the U.S. Presidential election. However, Israel allegedly promised the Biden administration that they would refrain from targeting Iranian oil infrastructure, which led to a significant sell-off at the end of the week, especially after pessimistic data from China.

Despite the recent decline, geopolitical tensions remain high and are likely to persist, which means the downside risk for oil prices may be limited.

From a technical perspective, WTI is oversold and has fallen below the key pivot of $69, which is now acting as immediate resistance. Recovering above this level could bring $72 back into focus as the next target. Given the ongoing geopolitical tensions, this scenario seems quite likely.

Political BTC!

As the U.S. election approaches, optimism about the future of cryptocurrencies is rising. Additionally, recently published U.S. economic data has eased concerns about a recession, which is positive for risky assets like Bitcoin (BTC).

A Trump victory could pave the way for bills like FIT21 to pass and confirm pro-crypto agency leaders. Even if Republicans win the Senate while Democrats control the House, the outcome could still be bullish for the crypto sector. The U.S. election is scheduled for November 5, with results expected by November 8.

On another front, several reports over the past few days suggest that whales are actively buying BTC. Whale activity often reflects broader investor interest, including institutional players. For example, BlackRock’s iShares Bitcoin Trust (IBIT) attracted $760 million in Bitcoin inflows within just three days. Notably, traditional investors are increasingly embracing digital assets through exchange-traded funds (ETFs), contributing to the growing number of whales in the market.

From a technical perspective, BTC/USD remains bullish but carries the risk of a correction. Currently, $64,000 is the key pivot level. As long as Bitcoin stays above this level, we can expect more buyers to enter the market.