Week Ahead: U.S. Inflation and UK GDP Data, AI Trade Outlook

The Democrats secured control of Congress in the U.S. midterm elections. Markets swung sharply last week as investors absorbed the outcome. An early advance in equities, gold and Bitcoin gave way to a sharp decline in technology shares as optimism faded and concerns mounted over AI expansion under a Democratic Congress.

Investors will keep the U.S. in focus this week, weighing the midterm election outcome and the prospects for AI stocks.

AI Trade: Legislation and Funding Under Scrutiny

Prospective legislation could curb data centre construction and bring tighter oversight of AI infrastructure, according to market concerns. Wall Street had already been assessing large capital expenditure projections and uncertainty over when that spending would generate returns. A 5.5% Nasdaq decline on Thursday preceded a 1.7% rebound on Friday. That pattern suggests a reduction in risk and exposure, rather than a wholesale retreat from the AI trade.

Tuesday’s earnings calendar includes a key release from CoreWeave after the close. The neocloud firm is considered a barometer for the AI trade, making its results among the week’s most consequential. Given its heavy debt burden, CoreWeave needs to explain its approach to financing expansion and managing borrowing costs.

Results from Nebius are due on Thursday. As another high-profile neocloud firm, its release represents a further major test of the AI infrastructure trade.

Persistent anxiety about the AI trade could bring fresh pressure on the Nasdaq.

NFP Forecast Beat Puts U.S. Inflation in Focus

October’s U.S. CPI and PPI releases also feature prominently on the macroeconomic calendar. The roughly 15% oil rally during October leaves room for headline CPI to surprise on the upside and exceed 4%. Oil subsequently fell sharply last week, with Brent down 16%.

The CPI forecast stands at 3.9%, against September’s 3.7%. Investors will also scrutinise core CPI.

An 80% probability of a December Fed rate hike is reflected in market pricing ahead of the releases. This follows Friday’s nonfarm payroll figures, which exceeded expectations: around 165,000 jobs were added versus a forecast of 65,000, and unemployment dipped to 4.1%.

A hot inflation reading on top of strong jobs data could solidify expectations for a December rate hike. The U.S. dollar could benefit, particularly against risk-sensitive currencies such as the Australian dollar.

At the June lows, AUD/USD is testing support. Further technology-sector weakness alongside strong data could push AUD/USD lower towards its 2026 lows.

UK GDP: Potential Support for GBP/USD After BoE Hike

Friday’s UK GDP release follows a widely anticipated Bank of England rate hike of 25 basis points.

Forecasts suggest quarterly UK GDP growth accelerated from 0.5% in Q2 to 0.7% in Q3.

Before the GDP release, the BoE raised rates by 25 basis points, with the vote proving more hawkish than expected. Its revised forecasts put inflation at 4.9% by Q2 2027 and growth this year at 1.6%, up from 1.1%.

GBP/USD could gain if strong GDP figures increase expectations of another BoE rate hike.

For December, market pricing indicates a 56% probability of a further 25-basis-point increase. Three hikes are priced in over the coming year.

A strong GDP release could lend weight to that rate outlook and help GBP/USD remain in its ascending channel.