Week Ahead: U.S. inflation, UK GDP and AI trade take centre stage

The U.S. midterm elections handed control of Congress to the Democrats, setting off a volatile week for markets. Equities, gold and Bitcoin rose in the immediate aftermath, but the gains in sentiment proved fleeting. Technology shares subsequently fell sharply as investors questioned the prospects for the AI buildout under a Democratic Congress.

With the implications of the midterm elections still being assessed, the U.S. will remain central to investors’ attention this week, alongside the next direction for AI stocks.

AI Trade Faces Legislative and Earnings Tests

Potential legislation has prompted fears that data centre development could slow and AI infrastructure could face tighter supervision. This adds to existing unease on Wall Street about sizeable capital expenditure forecasts and how long those investments will take to generate returns. The Nasdaq recovered 1.7% on Friday after dropping 5.5% on Thursday, a pattern suggesting that investors were scaling back risk and exposure rather than walking away from the AI trade entirely.

Among the week’s most important earnings reports will be Tuesday’s release from CoreWeave after the market closes. The neocloud firm is viewed as a gauge of the AI trade. With heavy debts, it needs to clarify how expansion will be financed and borrowing costs managed.

Thursday’s earnings release from Nebius, another leading neocloud firm, will put the AI infrastructure trade to a further significant test.

Should unease about the AI trade continue, selling pressure on the Nasdaq could return.

U.S. Inflation Takes Focus After NFP Surpasses Forecasts

October’s U.S. CPI and PPI reports will also draw attention on the economic calendar. Oil gained roughly 15% during October, creating scope for headline CPI to exceed expectations and come in above 4%. That follows a sharp retreat in oil prices last week, when Brent lost 16%.

A rise in CPI from September’s 3.7% to 3.9% is expected, with the core measure also set to attract close scrutiny.

An 80% chance of a December Fed rate increase is now reflected in market pricing, following a stronger-than-forecast nonfarm payroll report on Friday. Job creation totalled around 165,000 against expectations of 65,000, while the unemployment rate eased to 4.1%.

A stronger inflation reading after the solid employment figures could entrench expectations for a December rate increase. This could support the U.S. dollar, notably against currencies sensitive to risk sentiment, including the Australian dollar.

The June lows are being tested by AUD/USD. If strong economic releases coincide with further weakness in technology shares, AUD/USD could break lower towards its 2026 lows.

GBP/USD Could Draw Support From Strong UK GDP After BoE Rate Rise

Friday’s UK GDP figures follow the Bank of England’s decision to raise rates by 25 basis points, as expected.

Forecasts put quarterly UK GDP growth at 0.7% in Q3, an acceleration from 0.5% in Q2.

Ahead of the release, the BoE’s 25 basis point rate increase was accompanied by a more hawkish vote than expected. The central bank lifted its inflation projection to 4.9% by Q2 2027 and revised its growth forecast for this year upwards from 1.1% to 1.6%.

A firm GDP reading could bolster the case for another BoE rate rise, giving GBP/USD a lift.

Current market pricing implies a 56% chance of a further 25-basis-point increase in December, and three rate rises over the coming year.

Those expectations could be strengthened by robust GDP figures, helping to keep GBP/USD within its ascending channel.