Week of 24 AUGUST

The main event last week was the US Treasury's surprise move to increase its buybacks, overshadowing even more hawkish FOMC minutes and UK CPI figures. The bond market was unusually active, affecting other assets. Gold started the week at $4,450, falling towards $4,400 amid rising yields, but then quickly reversed after the US Treasury announcement, heading above $4,600 towards the end of the week.

The week ahead is fairly quiet on the news front, with a concentration of US data, including the PCE price index and revised Q2 GDP figures coming out ahead of the much-anticipated Jackson Hole Symposium at the end of the week.

Week in Review

Bond market strain was the theme of the week, as the yield on US 30-year bonds rose to a 19-year high and the Treasury announced it would double its long-term repurchases over the next two months to support liquidity. The move overshadowed key data releases and even the geopolitical situation as Washington changed its approach to the conflict in the Middle East. The 60-day period of the MOU expired, but hostilities did not resume, with US President Donald Trump saying he would increase economic pressure on a recalcitrant Iran that continued to refuse to open the Strait of Hormuz. The lack of progress in securing crude flows from the Middle East left Brent trading between $89 per barrel on Monday and almost $95 per barrel on Thursday after the UAE said it was joining an economic blockade of Iran. Global equities were generally under pressure, falling in the first half of the week. There was a brief bit of optimism in the tech space after Anthropic projected strong revenue growth ahead of its IPO, but the slide returned later in the week. JGB yields rose to 30-year highs amid growing expectations that the BOJ will hike in September after Japan's Q2 GDP missed expectations.

The FOMC minutes were more hawkish than anticipated, showing elevated concerns about inflation, with "many" members saying that a rate hike would likely be needed. The odds of the Fed hiking in September stayed around one-third, however, as the market largely looked past the minutes given softer jobs and cooler CPI that came out after the meeting.

UK CPI rose to 2.9% on the headline, just shy of the 3.0% forecast, driven by a rise in the energy price cap. The core rate remained unchanged at 2.6%, slightly hotter than projected, driven by higher housing costs. However, the odds of a BOE rate hike remained largely unchanged, with the market expecting one later in the year.

European PMIs generally exceeded expectations, confirming a rebound in the shared economy. Meanwhile, UK services PMI reached a six-month high.

Overall, the market was weighed down by debt concerns, with recent high yields attributed to market overcrowding amid hyperscalers' push to build out AI infrastructure. Softer-than-expected China industrial activity weighed on sentiment at the start of the week, leaving a wait-and-see sentiment amid generally soft summer trading.

Biggest Market Movers

• The dollar was lower through the week as investors digested the significance of the Treasury prepurchase change.
• The Swiss franc was the strongest of the major currencies as traders sought refuge, and gold jumped higher.
• The euro gained on better-than-expected PMI, but also benefited from dollar weakness.
• Bitcoin surged after the Treasury announcement, reaching its highest price since June.
• The Nasdaq was the worst-performing of the US major indices amid a general retreat in tech stocks and concerns about funding for AI infrastructure.

Top Events in the Week Ahead

Markets are likely to be in a holding pattern, given the relatively limited data ahead of what could be a major risk event: the Jackson Hole Symposium towards the end of the week. Traders will be watching to see whether Fed Chair Kevin Warsh finally offers clues about where interest rates are headed. The bond market will likely remain in focus as traders evaluate the impact of the Treasury's efforts to keep yields in check. In terms of data, the Fed's preferred core PCE will likely be the highlight, with the focus on whether it matches the cooling trend in prices. Tech traders may be waiting for Nvidia's earnings on Wednesday to help reignite the AI rally.

Jackson Hole and Rate Expectations

The major event of the week will be in Wyoming, where the Fed holds its annual Symposium, often a springboard for announcing policy changes. This will be the first for Fed Chair Kevin Warsh, and traders will be looking for more clues on what to expect from his direction of the world's largest central bank. The event starts on Thursday, and the speaker calendar is usually kept confidential until then, but the Fed Chair typically speaks on Friday. Notably, ECB President Christine Lagarde has not yet confirmed whether she will attend. Markets are monitoring the diverging rate path between the US and the Eurozone, as the ECB is widely expected to hike at its next meeting while the Fed could wait until December. The EURUSD shot higher this week on a weaker dollar, with a continuation heading towards resistance at the May high at 1.1800. A retracement could leave the pair heading towards support at the 50-day MA at 1.1510.

US PCE to Set Tone For Jackson Hole

A bunch of US data comes out on Wednesday, with the core PCE price index change likely to take the spotlight. The indicator is expected to remain unchanged at 3.3% annually, with the monthly rate accelerating to 0.3% from 0.1% previously. Investors are expecting hotter inflation, likely to leave the Fed on a hiking path despite softer economic readings. The other data point that could move the markets at the same time is the second reading of US Q2 GDP, which is expected to confirm the slowdown to just 1.5% annualised growth from 2.1% in the first quarter. A combination of cooler inflation and growth could leave the market recalibrating when to expect a rate hike, which could support gold. Hotter data could clip the yellow metal's wings. A move higher could leave bullion heading towards the psychologically important $4,600 resistance level, while a correction could return to the weekly low for support at the $4,300 handle.

Can Nvidia Rescue Tech Stocks?

The chipmaker and leader of the AI trade Nvidia will issue its Q2 earnings report on Wednesday, with investors hoping that a strong beat will help reassure the market that the AI trade is still going. However, high expectations could provide a high bar for the company to beat once again. The focus will likely be around commentary on demand, and whether it hikes guidance again. Earnings are expected to almost double to $2.09 from $1.05 a year ago, thanks to a 97% jump in sales to $92.1 billion. The share price has declined with the broader market over the last few session, and if earnings fail to impress, it could fall below the 50-day MA at $207 per share. A beat could leave NVDA heading towards resistance at the $230 level, which has failed to break through two times before.

Other Events and Earnings

On Monday, New Zealand retail sales figures are published. RBA minutes come out on Tuesday. Wednesday includes Australian inflation data. Thursday has German GfK consumer confidence and ECB minutes. Canadian Q2 GDP comes out on Friday.

Despite earnings season being unofficially over, notable names are still expected to report, including Nvidia, Intuit, Zoom, CrowdStrike, Salesforce, Marvell, and Dollar General.