It's going to be a week where markets will have to firm up its conviction ahead of key central bank meetings to follow towards the end of October and early November. For now, pricing seems pretty straightforward but perhaps the BOE outlook may be a little more tricky after Bailey's comments over the weekend here.
That is helping to see sterling get a slight pop higher today but GBP/USD is keeping around 1.1220-30 now, still not suggestive of any major upside return in any case. Besides that, the dollar is a touch softer today but that comes after a solid Friday where equities were hammered in Wall Street.
China's National Congress will be a key event to watch but more so for domestic sentiment, though that can sometimes spill over to broader markets as well. Expect the party line there to reaffirm continuity of current policy direction (including its zero-Covid approach), as Xi Jinping looks to make his mark on history and set out for a third term as the country's leader.
Besides that, it will be the final week of hearing from Fed speakers before the blackout period begins on 22 October. But it seems like we are quite certain of seeing a 75 bps rate hike next by the Fed, so there shouldn't be much in it unless there is a surprise tilt towards a 100 bps move before the 2 November decision.
The central bank bonanza will begin next week with the BOC, ECB and BOJ on the docket before the Fed and BOE take over in the following week alongside the US non-farm payrolls report. As such, this week will be one where markets gear up towards that so there might be a bit more chop in price action.
As for broader market sentiment, there will be little to shift the narrative. Inflation continues to be a problem for major economies and central banks are not shying away from tightening policy further. The Fed (75 bps expected) and ECB (also 75 bps expected) are set to continue with their existing path and while equities found some relief last Thursday after the US CPI data, Friday was a reminder that the bearish hold is not letting up yet as rates/yields also keep higher for the time being.
