Week of 10 AUGUST

A fairly quiet week on the data front, with the highlight being US NFP and Chinese trade data, which left the market reacting to geopolitics and a large flow of corporate earnings. Gold started the week at just over $4,100 per ounce and rose to over $4,200 by Wednesday amid easing geopolitical tensions, then climbed to over $4,350 towards the end of the week as the market took a more dovish view of the Fed.

A more active week ahead includes the release of US CPI data, the RBA's rate decision and UK Q2 GDP figures as markets assess the geopolitical landscape.

Week in Review

The week started on a positive note, with markets surging on better tech performance (Palantir shares jumped 30% after earnings) and another pause in the US-Iran war. Crude prices fell further midweek after US Treasury Secretary Scott Bessent said a deal to open the Strait of Hormuz was near. Sentiment was further bolstered after SpaceX earnings handily beat expectations, though the stock was dragged down by its projections of heavy capital expenditures, as with other hyperscalers. The weekend announcement of a pause in fighting in the Middle East to resume negotiations, coupled with OPEC+ agreeing to raise output by 188K barrels per day, saw Brent start the week at $84 per barrel, then fall to $78 after Bessent's comments. The Nasdaq rose almost 3% on Tuesday amid a surge in semiconductor stocks and is set to have its strongest weekly performance since May. With no progress in talks, a pickup in imports to China and Houthi attacks on Saudi Arabia on Thursday, Brent rose back to $83 towards the end of the week.

US indices posted a series of new records in the first three days of the week but pulled back on Thursday amid profit-taking and ahead of data. Notable earnings through the week include Microsoft's beat and rising AI revenue and Palantir's surge after raising full-year guidance. The dollar was supported by higher yields, despite markets pulling back expectations for a September Fed rate hike to about 50-50 from two-thirds odds at the start of the week.

China's trade balance showed a stronger-than-expected surge in exports, led by semiconductors and high-tech goods, supporting the view that AI infrastructure is boosting the country's exports. The US slapped a new tariff on polysilicon derivatives, keeping trade concerns alive and weighing on market sentiment in the latter half of the week.

Biggest Market Movers

• The dollar generally trended higher amid higher yields and continued geopolitical uncertainty.
• The yen was the worst-performing currency as markets adjusted following last week's joint intervention.
• Stronger Chinese data helped support the Aussie, making it one of the top-performing major currencies.
• Precious metals were supported by geopolitical uncertainty and lower crude prices, with silver the top performer.
• Tech stocks propelled equities, with the Nasdaq leading the way.

Top Events in the Week Ahead

The coming week is more active on the data front, but markets are heading into the generally slower August trading period as earnings season winds down. In terms of economic releases, the focus will likely be on US inflation data, which will be contextualised by the latest jobs figures. The RBA is expected to keep rates unchanged, and UK Q2 GDP is anticipated to slow but remain in positive territory. Markets will also be waiting for news on the situation in Hormuz, with weekends often the time for a shift. Given that the White House says talks are ongoing, it's likely Trump could order new airstrikes over the weekend, a possibility already priced in by higher Brent prices going into the weekend.

US Inflation Temporarily Easing

The highlight of the week will likely be the US CPI data, due Wednesday. Topline July inflation is anticipated to tick down to 3.4% from 3.5% in June, while the core rate is expected to fall the same amount to 2.5% from 2.6% a month earlier. The drop is attributed to expected lower fuel prices resulting from the MOU, but those prices have since gone back up, suggesting the relief will likely be temporary. A solid jobs print would likely leave the market focusing on the inflation figure after Fed Chair Kevin Warsh has insisted on reining in consumer prices. The September meeting is seen as the "put up or shut up" deadline as inflation remains well above the Fed's 2.0% target. Markets will likely have to respond primarily to the data this week, given the lack of Fed speakers to offer their views on inflation. Gold’s rally might be put to the test if inflation accelerates more than expected, bringing $4170 into focus, with a cooling CPI potentially pushing past $4400.

RBA To Hold as Traders Listen for Hawkishness

The RBA is unanimously expected to hold rates again at the conclusion of its meeting on Tuesday. At the last meeting, policymakers noted that inflation remained too high, leaving the door open for further rate hikes "as needed". Since then, data has been mixed, with strong jobs numbers and softer-than-expected inflation. The Aussie could get additional support if Governor Michele Bullock keeps her hawkish tone, confirming its breakout past 0.7000.

UK GDP to Keep BOE Hawkish

Thursday's release of UK Q2 GDP data is expected to show the British economy slowed but still grew despite the political turmoil during the quarter. The growth rate is projected at 0.2%, down from 0.6% in the prior quarter. A beat here could reassure markets that Prime Minister Andy Burnham's increased spending will be supported by rising fiscal revenue, helping sterling push past 1.3500 if long-term yields decline. The BOE was more hawkish than expected last time, prompting the market to anticipate a rate hike in September. But that is likely dependent on the British economy staying in the green, and a miss could weigh on sterling, paving the way for 1.3300.

Other Events & Earnings

Monday has BOJ minutes from two meetings ago. US existing home sales figures come out on Tuesday. Wednesday includes the final German CPI data. For Thursday, China's new loans are expected. Friday sees US retail sales data.

Earnings season will be in its wind-down phase this week, but many notable names remain to report, including Cisco Systems, Applied Materials, JD.com, Ferguson, Super Micro Computer, and Cardinal Health.