Nvidia, let’s see what you have Reuters

LONDON (Reuters) – The latest earnings from AI darling Nvidia (NASDAQ: ) and key inflation figures from the euro zone and Australia should keep markets busy in the coming week.

Gold’s relentless climb to record highs and a dollar under pressure, while speculation of a US interest rate cut is also building in investors’ sights.

Here’s your guide to the financial markets next week from Rae Wee in Singapore, Sruthi Shankar in Bangalore, Ira Iosebashvili in New York, Yoruk Bahceli in Amsterdam and Pratima Desai in London.

1/ NVIDIA, YOU ARE UP

Investor enthusiasm for artificial intelligence could be tested when chip maker Nvidia reports earnings on August 28.

Nvidia’s chips are seen as the gold standard in the AI ​​space, and its shares are up about 150% this year, helping to push the record high.

But the astonishing multi-year action and AI-mania has drawn comparisons to the dot-com craze that exploded more than two decades ago.

Investor reaction to disappointing results from megacap names like Alphabet (NASDAQ: ) and Tesla (NASDAQ: ) last month suggests markets may not be in a forgiving mood, especially when valuations for many companies in the sector are stretched .

Data highlights meanwhile include Friday’s US personal consumption expenditure (PCE) price index, a key gauge of inflation tracked by the Federal Reserve.

2/ WHEN SEPTEMBER COMES

Eurozone August inflation figures on Friday will be key for European Central Bank policymakers to decide whether or not to cut rates in September.

The data, preceded by national releases starting on Thursday, follows a small but unexpected rise in July, highlighting a bumpy last mile in reducing inflation.

Headline inflation may ease as oil prices have eased, but the focus will remain on the core figure and the dominant services sector, where price growth remains tighter.

Any positive surprise may warrant caution as traders have stepped up ECB rate cut bets in recent weeks. The focus turned to upside risks, but business activity in the Eurozone showed surprising strength in August.

Traders fully price in another 25 basis point rate cut on September 12 and see a strong chance of two more moves after that by the end of the year.

3/ HIGH STAKES

The stakes are high for the Reserve Bank of Australia (RBA), which has insisted interest rates must remain tight for an “extended period” as core inflation remains too high for comfort.

Wednesday’s July inflation figures could show headline inflation dipping back into the RBA’s 2-3% target band for the first time in three years.

And any sign that inflationary pressures are easing could put pressure on the central bank. It has become an outlier globally with reluctance to lower rates as many peers look to start or have already started easing cycles.

Investors are also hoping Wednesday’s data could provide some relief to consumer sentiment, which has been weighed down by steep borrowing costs.

Elsewhere, Friday’s August inflation report from Tokyo potentially provides further clues on Japan’s rate outlook.

4/ EURO BULLS

The euro is at its highest level this year against the dollar, benefiting from recent fluctuations in global markets.

Divergent rate expectations in the US and the eurozone are behind its gains. Traders are pricing in about 100 bps of Fed rate cuts by the end of the year, up sharply from the latest US payrolls data, while fully pricing in just two 25 bps ECB cuts.

The question is whether the euro, also at an all-time high on a trade-weighted basis, can maintain its momentum.

German business activity contracted more than expected in August, a negative sign for Europe’s economic engine, while euro zone wage growth slowed in the latest quarter, supporting the case for an ECB rate cut in September.

Euro bulls are a shy bunch, suggests the price action of recent years. It may need more convincing about the return of the euro before it takes effect.

5/ EVERYTHING THAT GLOWS

Gold has hit consecutive highs since 2022 and is up more than 20% so far this year. Now it’s $3,000 an ounce.

The stars aligned for the precious metal used primarily to preserve wealth during times of heightened security risks and political and economic turmoil.

Russia’s war against Ukraine triggered gold’s rally in February 2022. Rising commodity prices subsequently fueled inflation, which erodes the value of monetary assets.

Tensions in the Middle East and uncertainty over the fast-approaching US presidential election spurred further gains.

Strengthening the buying bullion trade is the prospect of lower US interest rates, which is pressuring the US currency and boosting gold’s appeal. It has a negative relationship with the dollar.

But gold bulls should heed the old adage that “nothing goes in a straight line,” as markets typically “buy the rumor, sell the fact.”