The good news is that U.S inflation has now cooled for the fourth consecutive month.

But the bad news is that it’s still running dangerously hot for the Federal Reserve.

In a positive development for financial markets, annual inflation in the United States slowed to 7.7% in October, the lowest level since January. This figure was below the 7.9% market forecast and much lower than the 8.2% witnessed in September. Core inflation which strips out food and energy prices rose 6.3% year-on-year last month, after rising to a 40-year high of 6.6% in September. 

Global stocks struggled for direction on Wednesday as investors focused on the US midterm election results.

• Since 1946, US stocks typically fared better in 6-month period after midterms elections, than six months prior.
   
• Democrats retaining control of Congress may be deemed negative for US stocks, while Republicans wresting control of Congress could be seen as positive for equities.

After dominating the FX space this year, could the dollar’s reign be coming to an end?

The past few weeks have been rough for the greenback thanks to renewed risk sentiment and markets scaling back bets for further aggressive Federal Reserve interest rate increases. Since the start of Q4, the dollar has depreciated against almost every single G10 currency – shedding more than 6% against the Norwegian Krone and 5.7% versus the New Zealand Dollar.

If markets had learnt anything this week, it’s that the Fed has got more rate hikes in store as the US central bank battles against inflation that’s at a 40-year high.

And we’re about to get the next chapter in that lesson: the incoming US consumer price index (CPI) is set to be the central focus for markets over the coming week.

In a widely anticipated move, the Bank of England (BoE) raised interest rates by 75 basis points on Thursday but sterling remained unamused.

In our Daily Market Analysis, we often allude to the US Federal Reserve being the most influential central bank in the world.

And if we ever needed a reminder, just consider the wild price action across asset classes surrounding the Fed’s latest policy clues delivered overnight.

An uneasy calm settled across financial markets ahead of the Federal Reserve’s policy meeting this evening. Equities struggled for direction; the dollar index remained static while gold prices were little changed.

The next few days promise to be eventful and potentially volatile for financial markets thanks to key economic reports from major economies, corporate earnings, and crucial central bank meetings.

The war against inflation remains fierce and relentless.

Central banks across the world are on the offensive, unleashing aggressive rate hikes despite the growing risks of collateral damage to their respective economies.