Week ahead: Central bank bonanza and tech earnings continue

Last week, the macroeconomic calendar was relatively quiet, with the focus firmly on earnings, including results from the likes of Meta, Tesla and SpaceX.

Worries over negative free cash flow at Meta and Tesla sparked a sell-off in the tech sector, with concerns over the sustainability of increased capex spending on AI infrastructure.

Meanwhile, oil prices surged amid ongoing tensions and conflict in the Middle East, with Brent rising to $113 a barrel, a five-month high.

Turning to this week, central banks and the UK budget will be the main focus, alongside more big tech earnings.

FOMC rate decision – a hawkish hold could pull on Gold

The Federal Reserve rate decision is due on the 28th, and policy is expected to be left unchanged. The data does not quite support a hike at this point, while the midterm elections the following week mean the Fed needs to keep a low profile.

Despite CPI at 3.7% and PPI at 6.3%, Fed Chair Warsh and officials such as John Williams have been deliberate in their messaging, signalling that the current environment does not warrant a faster pace of tightening than quarterly. For now, the Fed is content to wait and see. Comments from Warsh after the decision will be watched closely, and hawkish hints cannot be ruled out. The market is still pricing in a 78% chance of a December hike.

Complicating the outlook further will be core PCE data and Q3 GDP figures, which could fuel or unwind any reaction to the Fed meeting.

A hawkish hold by the Fed, alongside upside surprises in core PCE and GDP data, could revive dollar bulls and drag gold lower towards 3,940 and the 2026 lows.

ECB rate decision as French debt concerns remain

The ECB rate decision is due on the 29th. The ECB has already hiked rates twice over the last few months: the first in June, taking the deposit rate to 2.25%, and another 25-basis-point hike in September in response to inflation jumping back above 3% due to rising energy prices. Headline inflation stands at 3.8%, its highest level in three years.

Another rate hike before the end of the year is possible, but the problem for the ECB is that higher rates could negatively impact eurozone economic growth. ECB policymakers have suggested that another hike could be coming, although few have been specific about the timing. With few signs of building wage pressures, the likelihood of an October hike seems slim, with December the most likely time for the next move.

Unless, of course, the situation in France forces the ECB to step in to close the spreads. Discussions surrounding the French budget are expected to continue over the coming weeks, as the widening spread between French and German yields raises concerns over another eurozone debt crisis. Any hints from ECB President Christine Lagarde that she is concerned about moves in the bond markets will be watched closely.

Any hints from Lagarde towards a December hike, alongside a hawkish hold, could help support EUR/USD, where the direction of least resistance remains downwards towards 1.11.

BoJ to leave rates as yen benefits from safe haven flows

The BoJ is expected to leave interest rates unchanged at 1.25%, having hiked rates in September. However, it is likely to raise its inflation forecast for fiscal year 2027 at the October meeting, as rising oil prices continue to feed through into consumer prices.

Japanese core inflation rose to 2.1% year-on-year in September, topping the Bank of Japan's target for the first time since December. Goods inflation also picked up to 2.8%.

The data strengthens the case for a December hike, although a 25-basis-point move is not fully priced in until January. Therefore, hawkish comments from Governor Ueda could lift the yen, particularly if the Fed adopts a more dovish stance or U.S. data surprises to the downside.

The Japanese yen has strengthened over the week on safe-haven flows, and that could continue if earnings from big tech companies, including Alphabet, Microsoft and Amazon, due on the 28th and 29th, further fuel concerns over huge AI spending and the returns on that investment.