Nvidia, Show Us What You’ve Got – Reuters

LONDON (Reuters) – The financial markets are set for a busy week ahead as Nvidia, a leader in artificial intelligence, prepares to release its earnings, and crucial inflation data comes out from the eurozone and Australia.

Gold continues its remarkable ascent to record levels, while the dollar is facing pressure due to increasing speculation around potential U.S. rate cuts.

Here’s an overview of what to expect in the financial landscape in the coming days.

1. Nvidia’s Earnings Awaited

Investor interest in artificial intelligence might face a test as chip manufacturer Nvidia is set to report its earnings. Nvidia’s products are regarded as the benchmark in the AI industry, with its stock climbing approximately 160% this year, significantly contributing to market rallies.

However, the impressive multi-year growth of the stock, coupled with the AI frenzy, has sparked concerns reminiscent of the dot-com bubble from over two decades ago. The market’s reaction to disappointing earnings from major players like Alphabet and Tesla last month indicates that investors may be less forgiving, particularly with many valuations appearing inflated.

Meanwhile, key data to watch includes the U.S. Personal Consumption Expenditures (PCE) price index, scheduled for release on Friday. This index is a critical measure of inflation closely monitored by the Federal Reserve.

1. European Inflation Insights

August inflation figures for the eurozone will be crucial for the European Central Bank’s (ECB) decisions regarding rate cuts in September. National releases begin on Thursday and will follow a slight unexpected increase in inflation in July, suggesting challenges in controlling rising prices.

While headline inflation might reduce due to declining oil prices, attention will be on core inflation and the services sector where price growth remains persistently high. Any surprises in the data could lead to increased caution among traders, who have heightened expectations for ECB rate cuts in recent weeks.

1. Australia’s Inflation Data

For the Reserve Bank of Australia (RBA), the stakes are significant as it maintains that interest rates must stay elevated for an extended period due to persistent inflation concerns. July’s inflation numbers could indicate a return to the RBA’s target range for the first time in three years.

If the data shows abating inflation pressures, it could increase pressure on the RBA to reconsider its stance, especially as many central banks globally are either easing or contemplating rate cuts.

1. Strength of the Euro

The euro is currently at its highest this year against the dollar, benefiting from fluctuations in global markets and diverging rate expectations between the U.S. and the euro area.

While traders anticipate around 100 basis points of Fed rate cuts by year-end, expectations for ECB cuts are more subdued. The question remains whether the euro can sustain its strength in light of disappointing economic indicators from Germany and slower wage growth in the eurozone.

1. Gold’s Continued Ascent

Gold has consistently reached new records since 2022 and has increased over 20% this year, approaching the $3,000 an ounce mark. Several factors are contributing to this surge, including geopolitical tensions, economic uncertainty, and the potential for U.S. interest rate cuts, which enhance gold’s appeal as a safe-haven asset.

However, investors should remember that market trends rarely move in a straight line, and the old saying "buy the rumor, sell the fact" should be kept in mind as they navigate the volatile landscape.