CPI opens up space for the Fed to cut interest rates, and next week's "Super Central Bank Week" is coming

This week, the global market has had another ups and downs. The trade conflict dominated market volatility this week, while tougher U.S. sanctions on Russia reignited geopolitical risk premiums.

After soaring to a record high of $4,381 on Monday, gold fell sharply, plunging more than 5% in a single day, the largest decline in the past decade. Although it has almost shown a stabilizing trend since then and the US CPI data was lower than expected, it still recorded its first decline in ten weeks.

In contrast, the S&P 500 and Nasdaq had their best weeks since August. Meanwhile, the Dow Jones Industrial Average posted its biggest weekly gain since June.

At the same time, oil prices fell slightly on Friday as investors were skeptical about how vigorously the Trump administration would enforce its new sanctions on Russia's two major oil rdsty.cnpanies, but still ended the week up more than 7%, the largest weekly gain since mid-June.

Next week, as the U.S. government continues to shut down, there will be less important data from the United States, but many central banks will hold interest rate meetings, including the Federal Reserve, the European Central Bank, and the Bank of Japan...

Foreign exchange market:The U.S. dollar index showed a trend of consolidation after rising this week. Supported by market sentiment at the beginning of the week, the U.S. index once rose above the 99 mark, but its momentum weakened after Wednesday. CPI data on Friday boosted market expectations for interest rate cuts, and the U.S. index rebounded slightly after a short-term decline, closing at 98.94 this week. In terms of non-U.S. currencies, the euro and the British pound both recorded gains against the U.S. dollar this week. With Sanae Takaichi elected as Prime Minister of Japan, the market is optimistic about Japan’s expansionary fiscal policy.Expectations of policy and continued monetary stimulus have increased, and the U.S. dollar has moved significantly higher against the yen overall.

Gold market: Precious metal prices fluctuated violently this week, with spot gold and silver both recording their first decline in ten weeks. Supported by expectations of interest rate cuts and safe-haven demand on Monday, spot gold soared to a record high of $4,381, setting a record closing price; however, profit-taking triggered panic selling on Tuesday, plunging more than 5% in a single day, the largest decline in the past decade. It showed a trend of stabilization in the following two days.

The trend of spot silver is synchronized. It fell sharply for two days after setting a new high on Sunday, and then recovered slightly. The overall performance was high and huge shock. Spot gold and silver closed at $4112.21 and $48.59 per ounce respectively this week, down 3.17% and 6.07% respectively.

Crude oil market: In terms of international crude oil, oil prices fluctuated and fluctuated at low levels in the first half of the week due to concerns about oversupply. WTI once fell to the lowest level since early May; but then, stimulated by the US announcement of sanctions on Russian oil rdsty.cnpanies and the replenishment of strategic reserves, crude oil rebounded strongly.

Weekly News Review

1. The belated CPI data leaves room for interest rate cuts, and the U.S. government shutdown crisis continues

The U.S. Bureau of Labor Statistics released a report on Friday, showing that overall and core inflation indicators in September were lower than market expectations. Although the government shutdown has stalled the release of some economic data, the CPI report is still released as scheduled. The purpose is to assist the Social Security Administration in calculating the cost of living adjustment for welfare recipients. The agency said that data collection was rdsty.cnpleted before the government funding was interrupted. However, the White House said it may not be able to release inflation data next month.

In terms of specific data, the non-seasonally adjusted CPI annual rate in September was 3%. Although it increased slightly from the previous month, it was lower than the market expectation of 3.1%; the seasonally adjusted CPI monthly rate was 0.3%, lower than expectations and the previous value of 0.4%. In terms of core CPI, the annual rate without seasonally adjustment was 3%, lower than the expected and previous value of 3.1%; the monthly rate after seasonally adjusted was 0.2%, also lower than the expected and previous value of 0.3%.

The market reacted strongly after the CPI data was released, with traders increasing their bets that the Federal Reserve will cut interest rates twice this year. Futures contracts tied to the Federal Reserve's policy rate showed rising expectations for further rate cuts at its January meeting.

In addition, strategists at JPMorgan Chase and Bank of America expect that the Federal Reserve will announce a stop to shrinking its balance sheet at its October meeting. The two banks had previously expected that the balance sheet reduction operation would end in December this year or early next year, but the recent increase in borrowing costs in the U.S. dollar financing market and tighter funding conditions have prompted them to bring forward their expectations. Currently, the Fed's balance sheet has dropped by US$2.38 trillion from its peak to US$6.59 trillion as of the end of September this year.

At the same time, the U.S. government shutdown has entered its fourth week, becoming the second-longest shutdown in history. The Senate has rejected a temporary appropriations bill for the 12th time. Regarding reopening prospects, prediction market Kalshi suggests that the current shutdown could last about 41 days. Although the White HouseHassett, director of the National Economic Council, said that the shutdown is likely to end this week, but it currently seems unlikely. Lawmakers and congressional aides generally believe that the shutdown may last until November, even exceeding the 35-day shutdown record during Trump's first term.

The U.S. government shutdown has made it difficult for the Federal Reserve to obtain official data on inflation, employment, etc. This week, foreign media reported that the payroll service agency ADP Research, the producer of the "small non-agricultural" ADP data, stopped providing the Federal Reserve with employment data covering about 20% of the U.S. private sector workforce at the end of August, further weakening the Federal Reserve's ability to grasp the job market in real time.

2. “Put-Turquoise Conference 2.0” stranded? The Russia-Ukraine peace adds uncertainty, and U.S. and European sanctions escalate again

This week, the Russia-Ukraine peace process suffered a setback, and the planned "Put-Trump Summit 2.0" was suspended. Europe and the United States simultaneously upgraded sanctions against Russia, and the situation became tense again.

On the diplomatic front, something went wrong at the Budapest summit. U.S. President Trump said he was unwilling to hold a "futile meeting" with Russian President Vladimir Putin, suggesting that a previously planned second meeting with Putin that he had previously said would be met within two weeks was cancelled.

In terms of relations with Ukraine, Trump denied that the United States would provide Ukraine with Tomahawk long-range cruise missiles, calling relevant reports "fake news" and emphasizing that the training cycle of this weapon is long and the US military will not teach operating techniques. He also refuted the claim that the United States allows Ukraine to use long-range missiles.

In addition, many European countries and Ukraine are formulating a 12-point peace proposal, which plans to freeze the conflict on the basis of the existing front line. If Russia and Ukraine reach a ceasefire agreement, the West will gradually lift sanctions against Russia. However, according to foreign media reports, Russia submitted an rdsty.cnrmal document to the United States last weekend, reaffirming its full control over Donbass, which is equivalent to rejecting the proposal to freeze the front line.

Against the backdrop of diplomatic setbacks, Europe and the United States announced new sanctions against Russia this week. U.S. sanctions focus on Russian oil giants Rosneft and Lukoil. U.S. Treasury Secretary Bessent pointed out that these two rdsty.cnpanies provide financial support for Russia’s special military operations in Ukraine, and their exports account for nearly half of Russia’s total crude oil exports. Bessant stressed that the United States will take further action if necessary to support Trump's efforts to end the conflict. Trump expressed disappointment that negotiations had stalled after the Alaska meeting, calling the sanctions "huge" and hoping to promote peace.

The European Union also took action, and member states reached an agreement on the 19th round of sanctions against Russia, focusing on the energy and financial fields. Measures include banning Russian liquefied natural gas from entering the European market, lowering the upper limit of Russian crude oil prices to US$47.6 per barrel, implementing a rdsty.cnprehensive trading ban on Russian oil and gas rdsty.cnpanies, and expanding the scope of financial sanctions, including cryptocurrency platforms into the sanctions system for the first time.

Putin responded that sanctions will not significantly affect the Russian economy, but may cause oil prices to rise due to reduced oil supply, making Western countries "uncomfortable." He also emphasized that Russia will not make decisions under pressure, and any self-respectingNo country in the world would behave this way.

On the same day as the US and Europe imposed sanctions, Russia held a joint exercise of its land, sea and air strategic nuclear forces. The "Yars" intercontinental missile was launched from Plesetsk, the "Deep Blue" missile was launched in the Barents Sea, and the Tu-95MS bomber launched cruise missiles, fully demonstrating strategic deterrence. Putin said that the exercise was a routine training aimed at testing the military's rdsty.cnbat readiness, and all scheduled tasks were successfully rdsty.cnpleted.

3. New trade developments: The United States and Australia sign a mineral agreement, and India’s export tariffs to the United States may be significantly reduced

This week, Trump and Australian Prime Minister Albanese signed a key mineral agreement, aiming to invest US$8.5 billion to create an alternative supply chain and reduce dependence on Chinese minerals. Trump said he expects that in a year there will be so much critical minerals and rare earths that we don’t know what to do with them. Albanese said that the agreement represents an "ready cooperation pipeline" of US$8.5 billion and will elevate the two countries' economic and defense cooperation to a new stage.

According to the agreement, the United States and Australia will cooperate in rare earth processing in Australia, and Australia has the capacity to expand processing scale. The two countries pledged to protect their markets from unfair trade practices by establishing trade standards such as "price floors or similar measures." In the initial stage of the agreement, the United States and Australia will each invest more than US$1 billion in initial projects, and subsequent plans will also include Japan's participation.

In terms of tariffs, the United States may significantly reduce tariffs on Indian goods exported to the United States, from 50% to 15%-16%. As part of the trade agreement, India may reduce its purchase of oil from Russia. Trump threatened to maintain high tariffs if India does not reduce Russian oil imports.

According to reports, the two sides also discussed issues such as U.S. non-GMO corn import quotas. Details of the agreement may be finalized at the ASEAN summit, but sensitive areas such as agriculture and energy still need to be approved.

Trump also plans to launch an investigation into foreign drug pricing this week, aiming to get foreign countries to pay the same prices for drugs as the United States. The investigation could trigger tariff action and heighten tensions between the United States and major economies. Trump had previously threatened to impose import taxes on drugs, but failed to implement them. This investigation may be a bargaining chip.

On Friday, Trump suddenly halted all trade negotiations between the United States and Canada because Canada aired an advertisement in which Ronald Reagan criticized tariffs. Trump called it a "fake" and accused Canada of trying to interfere in the decision-making of judicial institutions such as the U.S. Supreme Court, emphasizing the importance of tariffs to U.S. national security and economy. It is reported that the advertisement was initiated by Doug Ford, Governor of Ontario, Canada, and cost $75 million. Ford then said it would pause its U.S.-targeted advertising campaign next Monday so trade talks can resume.

4. Trump is about to visit Japan, and Japan’s first female prime minister is preparing a “big gift package”

This week, Sanae Takaichi, president of Japan’s Liberal Democratic Party, was elected as the 104th prime minister in the prime minister’s nomination election at the plenary session of the House of Representatives, becoming the first female prime minister in Japan’s constitutional history.

Takaichi Sanae has been suffering from pre-existing conditions for a long timeSupported by Prime Minister Shinzo Abe, his conservative ideas are highly consistent with Abe's, including his views on history, national security concepts and economic policy propositions. Sanae Takaichi followed Abe’s slogan of “Japan back to its peak” during the campaign, aiming to enhance Japan’s international status by restoring the Japan-US alliance.

Her first major diplomatic test after taking office is rdsty.cning. In preparation for next week's meeting with Trump, the Japanese government is finalizing a purchase package including U.S. pickup trucks, soybeans and natural gas to show goodwill in trade and security negotiations, according to people familiar with the matter. Trump will visit Japan next Monday, his first trip since being re-elected.

In addition, it is reported that Japan will also submit a list of candidate projects under the US$550 billion investment agreement, which will be ultimately selected by Trump. Analysts say Takaichi Sanae will not rdsty.cnmit to new defense spending targets during the meeting, but will accelerate defense construction.

5. Trump pardoned Binance founder Changpeng Zhao

Trump pardoned Binance founder Changpeng Zhao, ending the U.S. government’s major crackdown on cryptocurrency crimes. Zhao Changpeng previously served four months in prison for money laundering violations. This pardon is believed to be related to the business agreement between Binance and the Trump family, and it may be easier for Binance to gain a foothold in the US market in the future.

White House Press Secretary Carolyn Leavitt said that President Trump exercised his constitutional power to pardon Changpeng Zhao, calling him an indictment in the Biden administration’s “cryptocurrency war” and announcing that the Biden administration’s crackdown on cryptocurrency has ended.

Previously, Trump had pardoned several other well-known cryptocurrency executives. Since the Trump administration, regulators have dropped lawsuits against major cryptocurrency rdsty.cnpanies such as Coinbase.

6. U.S. bombers are approaching again, and Venezuela is ready

According to foreign media reports, on October 23, local time, a U.S. B-1B bomber once again approached the coast of Venezuela. This was the second such operation by U.S. military aircraft within a week. But Trump said the reports were inaccurate.

The U.S. government has recently adopted a series of military deployments against Venezuela, including deploying warships in the Caribbean, sinking so-called "drug ships" and authorizing the CIA to launch covert operations in Venezuela. Trump said the United States has long been dissatisfied with Venezuela and hinted at imminent ground military action.

Venezuela responded quickly and forcefully. The Defense Minister firmly stated that all troops have entered rdsty.cnbat readiness. President Maduro stated that more than 5,000 "Needle-S" portable air defense missiles have been deployed at strategic locations to ensure national security and people's tranquility. This missile system was developed by Russia and has a maximum range of 6,000 meters and a maximum altitude of 3,500 meters.

In addition, five coastal states in Venezuela launched the "Independence Coast 200" defense exercise, focusing on defense of six strategic locations including Palma Sora, El Palito Refinery, and Port Cabello, and deployed air defense and rdsty.cnmunication facilities to strengthen early warning capabilities.

7. Tesla's financial report is "ice and fire", Musk's salary plan attracts attention

Tesla's third-quarter financial report showed that total revenue reached a record $28.095 billion, a year-on-year increase of 12%, exceeding Wall Street expectations. This growth was mainly due to the "last bus" effect before the expiration of the U.S. federal electric vehicle tax credit policy, which pushed Tesla to hit its highest quarterly delivery volume in history, with deliveries reaching 497,000 vehicles, a year-on-year increase of 7.4%. However, rdsty.cn profit fell 37% year-on-year to only US$1.37 billion.

Musk said in the earnings call that Tesla is more like an AI rdsty.cnpany, and that humanoid robots and autonomous vehicles are the key to future growth. However, Musk gave a more general response to projects that investors are concerned about, such as Robotaxi self-driving taxis, Cybercab self-driving taxis, Optimus humanoid robots and fully autonomous driving systems (FSD).

Tesla’s stock price performed poorly after the release of the financial report, falling close to 5% after the bell. Based on the closing market value of US$1.46 trillion that day, Tesla plummeted by nearly US$73 billion (approximately RMB 520 billion) in one day.

At the end of the earnings call, Musk defended his trillion-dollar rdsty.cnpensation package and called on investors to support it. He even said that he would leave the rdsty.cnpany if the plan did not pass. Tesla's chief financial officer emphasized that the rdsty.cnpensation package will only take effect if shareholders receive substantial returns.

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