[Baoxing Global] This Week’s Focus: Will CPI Be the Turning Point for Gold? The Dollar Remains Strong; Expectations for Fed Rate Hikes Shift

【Answer 1】 At 2:00 a.m. Thursday, the Federal Reserve will release its Beige Book—a summary of current economic conditions across the U.S. On Friday, Fed Vice Chair Philip Jefferson will deliver another speech, while Fed Chair Jerome Powell will attend the IMF Annual Meetings and hold a fireside chat with IMF Managing Director Kristalina Georgieva. Recently, Fed officials have indicated that further rate hikes may still be necessary this year—but stressed they are not in a rush to tighten policy at consecutive meetings. As a result, market bets on another hike in October have weakened, and attention is gradually shifting toward the Fed’s December policy decision. That said, persistently high inflation or robust U.S. economic performance could continue to support the dollar. II. Key Data Releases: Back-to-Back CPI and PPI Reports—Can Gold Break Out of Its Range? At 8:30 p.m. Wednesday, the U.S. will release September’s Consumer Price Index (CPI) and core CPI. According to a Reuters survey, analysts expect headline CPI to rise 3.7% year-on-year and core CPI to rise 2.5% year-on-year—well above the Fed’s 2% annual inflation target. On Thursday, the U.S. will also publish the Producer Price Index (PPI) and retail sales data—providing further insight into pricing pressures at the production level and consumer spending trends. If CPI comes in higher than expected, markets may reprice upward the odds of additional Fed rate hikes—exerting downward pressure on gold. If inflation proves lower than anticipated, concerns about further monetary tightening could ease. And if the data lands broadly in line with expectations, gold may remain range-bound in the near term—awaiting clearer directional signals. III. U.S. Earnings Season Begins: Can Corporate Profits Sustain the Equity Rally? The third-quarter U.S. earnings season kicks off this week—with major banks leading the way. JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo plan to report earnings on Tuesday; Bank of America, Morgan Stanley, and BlackRock will follow on Wednesday. According to FactSet, S&P 500 constituents are projected to post ~29.5% year-on-year profit growth and ~12.3% revenue growth for Q3. If realized, this would mark the third consecutive quarter of profit growth exceeding 25%. Strong earnings expectations could provide support for U.S. equities—but rising Treasury yields may simultaneously weigh on equity valuations.

Probability of a Rate Hike in October Falls Below 20%; U.S. Stocks Close Weekly Gains: Can This Week’s CPI and Earnings Reports Sustain the Momentum?

【Answer 2】 In energy markets, traders are simultaneously pricing in potential supply restoration—and grappling with deteriorating shipping security risks. Even as negotiations progress, crude transportation costs are unlikely to fall significantly unless normal navigation through the Strait of Hormuz is fully restored. Oil price volatility has also heightened sensitivity around this week’s U.S. inflation data. With the probability of an October rate hike now below 20%, how much impact will Wednesday’s CPI report have? Following the Fed’s 25-basis-point hike in September, market expectations for the timing of the next move have shifted markedly. The probability of a rate hike in October—once hovering near 70%—has now dropped to 17.7%, while the odds of holding rates steady have risen to 82.3%. Markets still anticipate a relatively high likelihood of another 25-basis-point hike in December. Recent Fed official commentary largely aligns with this outlook. Jefferson and Williams both emphasized that there’s no need to raise rates at consecutive meetings; Waller noted that further hikes remain possible if incoming data aligns with expectations—but such moves need not occur back-to-back. The key question, however, is why long-term Treasury yields haven’t meaningfully declined—even as October hike expectations have cooled. Last week, the 10-year Treasury yield peaked at 5.368%, before retreating to around 5.25%—still near historic highs. At 8:30 p.m. Beijing time on Wednesday, the U.S. will release September’s CPI. Markets currently forecast headline CPI up ~3.7% year-on-year and core CPI up ~2.5% year-on-year. Given recent sharp increases in gasoline prices, markets have already braced for some rebound in headline inflation—making the trajectory of core inflation even more critical. If core CPI meets expectations, the case for pausing in October may solidify further. Yet with the market having already dramatically scaled back October hike odds, it remains uncertain how much further downside pressure ‘in-line’ CPI data can exert on Treasuries—the bond market’s own reaction will likely be decisive. Conversely, if services inflation reaccelerates, markets may need to reassess the policy path beyond December—even if no immediate hike occurs in October, long-term rates could remain elevated. Moreover, CPI isn’t the only data point this week. On Thursday, the U.S. will also release September’s PPI, retail sales, and initial jobless claims. Taken together, these reports will offer richer context on whether inflationary pressures are broadening, and whether consumer demand remains resilient amid high oil prices and elevated interest rates—providing more meaningful insights than any single CPI print alone. Bank and Chip Earnings Step Up—U.S. Equity Rally Needs Profit Support Beyond macro data, the U.S. Q3 earnings season officially begins this week. Starting Tuesday evening (Beijing time), major banks—including JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo—will begin releasing results; Bank of America, Morgan Stanley, and others follow on Wednesday. Bank stocks, however, have recently underperformed. Although major U.S. indices have posted consecutive gains, the S&P 500 Banks Index has fallen roughly 7.5% over the past month. Rapidly rising long-end Treasury yields have raised investor concerns about funding costs, credit demand, and asset valuations. This round of earnings will be scrutinized not only for profit growth—but also for loan volumes, deposit costs, credit risk exposure, and management’s assessment of financing demand from consumers and businesses. If bank earnings prove resilient, they could at least alleviate market fears that high interest rates are already harming the broader economy.

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Inflation Reports, Retail Sales and Big Bank Profits Arrive This Week

Inflation Reports, Retail Sales and Big Bank Profits Arrive This Week

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