Week ahead: Central banks take centre stage as more tech earnings arrive

A light macroeconomic calendar last week left corporate results at the centre of attention, with Meta, Tesla and SpaceX among those reporting.

Technology shares came under selling pressure as negative free cash flow at Meta and Tesla prompted questions about the sustainability of rising capital expenditure on AI infrastructure.

Persistent tensions and conflict in the Middle East also drove a sharp rise in oil prices. Brent reached $113 a barrel, its highest level in five months.

Central bank announcements and the UK budget take centre stage this week, together with further results from big technology companies.

FOMC rate decision could weigh on Gold if hold carries hawkish signals

With the data not yet providing sufficient grounds for a rate rise, the Federal Reserve is expected to keep policy unchanged at its decision on the 28th. The midterm elections taking place the following week also leave the Fed needing to avoid drawing attention to itself.

CPI of 3.7% and PPI of 6.3% have not shifted the carefully judged message from Fed Chair Warsh and officials such as John Williams: the current environment does not call for tightening more often than quarterly. For the time being, the Fed is comfortable assessing developments before acting. Attention will turn to Warsh's remarks following the decision for possible hawkish signals. Markets continue to assign a 78% probability to a December rate rise.

Core PCE and Q3 GDP releases introduce another source of uncertainty, with the potential to amplify or reverse the response to the Fed meeting.

Dollar bulls could find renewed impetus if a hawkish Fed hold coincides with stronger-than-expected core PCE and GDP readings. That combination could push gold down towards 3,940 and the 2026 lows.

ECB rate decision faces backdrop of French debt worries

Headline inflation of 3.8%, a three-year high, provides the backdrop to the ECB's rate decision on the 29th. Two rate increases have already taken place in recent months. The June move lifted the deposit rate to 2.25%, followed by a 25-basis-point increase in September as rising energy costs drove inflation back above 3%.

The possibility of a further rise before year-end remains, although the ECB faces the risk of higher borrowing costs damaging eurozone economic growth. Policymakers have pointed to another potential increase without, in most cases, specifying when it might come. Evidence of growing wage pressures remains limited, making an October move appear unlikely and December the likeliest timing for the next increase.

Developments in France could, however, force the ECB to act to narrow spreads. As French budget talks are expected to extend over the coming weeks, the widening yield gap between France and Germany is stirring fears of a renewed eurozone debt crisis. Close attention will be paid to whether ECB President Christine Lagarde expresses any unease about bond market developments.

A hawkish hold, accompanied by any indication from Lagarde that rates could rise in December, could lend support to EUR/USD. The pair nevertheless faces less resistance to a decline towards 1.11.

BoJ set to hold rates while safe-haven flows lift yen

After increasing rates in September, the BoJ is expected to maintain them at 1.25%. An upward revision to its fiscal year 2027 inflation forecast is nevertheless likely at the October meeting, reflecting the continued pass-through of higher oil prices to consumer prices.

September brought a rise in Japanese core inflation to 2.1% year-on-year, the first reading above the Bank of Japan's target since December. Goods inflation accelerated too, to 2.8%.

Those readings add weight to the case for a December rate increase, but markets do not fully price in a 25-basis-point move until January. The yen could therefore rise on hawkish comments from Governor Ueda, with a more dovish Fed stance or weaker-than-expected US data potentially lending further support.

Safe-haven flows have lifted the Japanese yen over the week. That strength could persist if the earnings releases from big technology companies, including Alphabet, Microsoft and Amazon, on the 28th and 29th add to worries about substantial AI expenditure and the returns on that investment.