Week Ahead: US CPI and Midterm Elections Put S&P 500, USDX and Gold in Focus

Key Takeaways

• The S&P 500 gained 1.2% in the week of 9 October to reach fresh record highs, extending its year-to-date gain to about 14.1%.
• September US CPI, due on 14 October, is forecast at 3.6% year-on-year, up from 3.4%. Thursday’s PPI and retail sales reports could further shape rate expectations.
• The Fed raised rates by 25 basis points in September to 3.75%–4.00%. By early October, markets priced a 17%–19% probability of an October hike, with December seen as a more likely window.
• The 3 November midterm elections bring fiscal policy and congressional control into focus, although midterm years have historically produced weaker average S&P 500 returns.
• Traders are watching USDX, EURUSD, XAUUSD, S&P 500 and BTCUSD around the next economic releases.

Markets enter the week with inflation and the midterm elections as the two main themes. The S&P 500 rose 1.2% last week, the Dow gained 0.9% and the Nasdaq advanced 0.6%. Technology stocks recovered from earlier selling, and easing Treasury yields supported equity valuations. The rally comes as inflation remains elevated and investors assess whether the Fed will raise rates again before the end of 2026.

Why Traders Are Watching Global Markets

The September CPI report on Wednesday, 14 October is the main catalyst of the week. Inflation remains central to Fed policy after the September meeting, and the minutes released in October showed officials remained concerned about inflation, though they differed on the reasoning for further tightening. Major US banks also begin reporting Q3 earnings this week, giving fresh insight into lending conditions, consumer demand and the effects of higher borrowing costs.

Key factors influencing markets include:

• CPI outcome: Higher-than-expected inflation could lift Treasury yields and the US dollar while pressuring gold and high-valuation equities. Lower-than-expected inflation could support equities and gold and reduce near-term dollar demand. An in-line reading could leave markets range-bound as attention shifts to PPI, retail sales and earnings.
• Federal Reserve policy: Rate expectations for October and December will depend on how inflation data compares with forecasts.
• Treasury yields: Stronger inflation could push yields higher and challenge the valuations behind the rally.
• Bank earnings: Q3 results from major US banks will show how higher borrowing costs are affecting the economy.
• Midterm elections: On 3 November, voters will elect all 435 House members and about one-third of the Senate. The result will shape expectations for taxation, government spending and regulation.

The Midterm Election Backdrop

The S&P 500 has historically performed less strongly in midterm years, followed by stronger returns in the pre-election year. This year, the index has already recovered from its March low, and its earlier correction was smaller than the historical average midterm decline.

RBC Wealth Management research covering 1953 to 2025 found that market performance varied across combinations of presidential and congressional control. Unified Republican control under Republican presidents was among the stronger configurations, alongside arrangements involving Democratic presidents. These patterns do not show that one political outcome causes higher returns, since each period also reflects different inflation, interest rates and earnings trends. The more pressing question is how election expectations influence fiscal spending, Treasury borrowing and bond yields. Higher spending may support growth and revenue, but larger deficits could lift yields and pressure valuations.

Key Movements of the Week

USDX

• USDX continued to consolidate throughout the week and could maintain its momentum while pending inflation reports.
• Should USDX rise further, look for bearish price action at 102.55.
• In the event that price trades lower, monitor price action at 101.00.

EURUSD

• EURUSD is consolidating at the 1.1150 monitored area.
• Should price trade lower, look for bullish price action at 1.1110.
• If price trades higher, monitor price action at 1.1350.

XAUUSD

• Gold traded up from the lower end of the 4080 monitored area.
• As the price rises, monitor price action at 4280.
• Should the price trade lower, look for bullish price action at 4055.

S&P 500

• SP500 traded up from the 7735 monitored area.
• Monitor price action once price reaches a new high.

BTCUSD

• BTC is trading at the 84060 monitored area.
• Should BTC trade lower, look for bullish price action at 78450 or 76450.

What to Watch Next

CPI on 14 October is the main catalyst, followed by Thursday’s PPI and retail sales reports. A hawkish surprise could support USDX and Treasury yields while pressuring gold and the S&P 500. A softer reading could ease rate expectations and support risk assets.

For a deeper analysis of the Fed outlook, upcoming events and technical levels across key markets, read the full article.