Week Ahead: NFP and midterms share focus with RBA rate decision and Apple earnings

Five central banks set interest rates last week. No change came from the Fed, the ECB or the BoJ; the RBNZ also held in a surprise decision, while the BoC raised rates. A packed technology earnings calendar brought results from Alphabet, Amazon and Intel, adding momentum to the sector's sell-off.

With the AI trade showing signs of strain, this week's U.S. midterm elections, nonfarm payroll report and Apple earnings could make for unsteady markets. The policy calendar also brings RBA and BoE rate decisions.

Tuesday: U.S. midterm elections to determine Congressional control

Tuesday's U.S. midterm elections will settle whether Congress remains under unified Republican control or the government becomes divided.

A Democratic takeover of the House is expected. Whether the party can also win the Senate is still in question.

Winning both chambers could allow Democrats to tighten regulation of banks, crypto and technology firms. Legislative change would still face limits: Trump would retain his veto and executive authority in areas including immigration, tariffs and foreign policy. A Democratic victory could hurt U.S. stocks. Anticipation of fiscal tightening and slower growth could put Treasury yields and the U.S. dollar under pressure too.

Defence and deregulation could benefit from Republicans maintaining control. The same result could heighten unease over tariffs and the deficit.

Fears that tariffs could fuel inflation and further rate hikes could send Treasuries and the U.S. dollar higher after a Republican victory.

Markets may respond most favourably to “gridlock”: a Democratic House paired with a Republican Senate. By constraining spending and regulatory changes, that outcome could hold uncertainty down. It could support US stocks but weigh on the USD and Treasuries.

75% December hike probability: U.S. nonfarm payrolls in focus

The probability of a December hike now stands at 75%, down from 84% before the Fed meeting. Rates were held as expected, but the policy message was less hawkish than anticipated. Expectations eased despite a rise in inflation to 3.1% in the core PCE figures and a stronger-than-forecast Q3 GDP reading of 3.4%.

Friday's nonfarm payroll report will command close attention following Federal Reserve Chair Kevin Warsh's signal that patience is needed. He indicated that further data and information are necessary before the next move.

September brought a disappointing report: job creation slowed to 29K to 133K, missing the 90K forecast. Yet the employment subcomponent of the composite PMI rose at its second-fastest pace since 2022. Taken together with lower initial jobless claims, this points to upside risks.

Monday's ISM manufacturing PMI offers an early opportunity for further insight before Friday's report. Wednesday then brings ISM services alongside the ADP payroll report.

For Gold, already at 2026 lows, robust jobs figures could prompt another downward move.

25 basis points: RBA rate decision expected to lift rates to 4.85%

An 85% probability of an RBA hike is priced in. Expectations point to a 25 basis points increase, taking rates to 4.85%, after the bank raised them by 25 basis points at the September 29 meeting.

At 4.3% year-on-year, the latest headline inflation reading accelerated from August's 4%. Trimmed mean inflation also moved higher, reaching 3.6%. Both measures substantially exceed the upper bound of the RBA's 2% to 3% target range.

Only a 50% probability is assigned to another RBA hike in 2027. A hike with a hawkish message would therefore be necessary to convince the market that more increases could lie ahead over the coming year, and to take AUD/USD towards 0.71.

The wider macro calendar also features Eurozone inflation and the BoE rate decision.

$113.4 billion revenue forecast: Apple earnings face valuation test

Record share-price highs have marked Apple's resilience during the technology sell-off. Monday's earnings release, after the market close, will now test whether the company's elevated valuation can be justified.

Forecasts put EPS at $1.98 and revenue at $113.4 billion, a 10% year-on-year revenue increase. Expected iPhone revenue of $56.5 billion would account for around half of total sales. Services are forecast to generate $31.6 billion, supporting margins; gross margins are projected at around 48%.

Services remain the primary source of margin strength. Investors would likely gain confidence in the rally's fundamental support if guidance holds and margins exceed 47%.