Overview
- Investors are placing greater emphasis on AI profitability rather than capital expenditure following the latest earnings season.
- Gold remains range-bound ahead of key US employment data, while the US dollar trades near an important technical support zone.
- The US Non-Farm Payrolls report and unemployment rate will be the primary catalysts for market volatility this week.
- Traders should monitor whether earnings optimism continues to support equity markets or if weaker macroeconomic data shifts sentiment towards safe-haven assets.
AI Spending Faces a New Test as Markets Focus on Returns
The latest earnings season has highlighted a shift in how investors assess artificial intelligence investments. For much of the AI boom, technology companies were rewarded for expanding infrastructure through larger data centres, increased chip purchases and higher capital expenditure. Recent earnings suggest investors are now paying closer attention to whether those investments are producing measurable financial returns rather than simply demonstrating ambition. Traders are actively watching to see whether current valuations reflect true growth or if there is an AI bubble in the stock market.
Microsoft and Amazon Show AI Demand Remains Strong
Microsoft and Amazon continued to attract buying interest after reporting strong cloud demand supported by accelerating Azure and AWS growth. Customers continue reserving computing capacity years in advance, allowing both companies to justify continued investment with visible revenue growth and expanding order backlogs. Their results indicate that AI infrastructure spending is being supported by existing customer demand rather than future expectations.
Investors Want More Than Higher AI Spending
Alphabet and Meta delivered solid operational performance but faced greater scrutiny over whether rising infrastructure costs can be matched by sustainable profit growth. Alphabet continues benefiting from strong cloud and advertising demand, while Meta is relying on improvements in advertising efficiency and user engagement to justify its expanding AI investment programme.
The broader AI theme remains intact. Businesses continue investing in cloud infrastructure, enterprise AI applications and automation, while demand for computing capacity remains healthy. However, companies are increasingly being judged on their ability to convert AI investment into recurring revenue, stronger margins and healthier free cash flow.
The AI Story Is Moving Into Its Next Phase
The report suggests that slower capital expenditure would not necessarily signal the end of the AI cycle. A moderation following the current wave of data centre construction could allow revenue growth to catch up with infrastructure spending and support improvements in free cash flow. A slowdown driven by weaker demand, declining utilisation or cancelled projects would present a more challenging outlook for both technology companies and their suppliers.
US Labour Market Returns to the Spotlight
Attention now shifts towards Friday’s US labour market report. Economists expect Non-Farm Employment Change to increase by 88,000 following the previous reading of 57,000, while the unemployment rate is forecast to remain unchanged at 4.2%. Understanding how to execute 5 steps to trade forex on news releases will be crucial for managing volatility around this release.
The employment report could influence expectations for Federal Reserve policy over the coming months. Stronger-than-expected payroll growth may reinforce confidence in the US economy and provide support for the US dollar, while softer employment data could increase expectations for future policy easing and lift demand for assets such as gold.
Markets are also preparing for next week’s Reserve Bank of Australia press conference and the Consumer Price Index report, both of which could influence currency markets and expectations for global interest rates.
Three Market Scenarios to Watch
US Dollar Recovery
The US Dollar Index is trading around the 99.35 monitoring zone following recent weakness. A recovery towards 100.20 could attract fresh selling interest, while continued consolidation may reinforce the broader bearish structure. Traders interested in navigating currency moves can explore our complete guide to VT Markets forex trading.
Gold Awaits a Breakout
Gold remains trapped within a tight trading range after failing to close above 4,117. Support around 4,020 and 3,995 remains in focus, with a decisive breakout likely to determine the next directional move. For those evaluating safe-haven assets, comparing Bitcoin vs Gold provides useful context for market sentiment.
Risk Assets Hold Key Technical Levels
EUR/USD and GBP/USD continue to trend higher, while USD/CAD remains under pressure after breaking below its previous swing low. The S&P 500 is testing resistance near 7,550 as improving risk sentiment supports equities, while Bitcoin remains vulnerable following its recent decline. Oil prices continue to consolidate as traders monitor geopolitical developments.
Key Symbols to Watch
USDX | XAUUSD | EURUSD | SP500 | BTCUSD
Upcoming Events
| Date | Currency | Event | Forecast | Previous | Analyst Remarks |
| 3 Aug | USD | ISM Manufacturing PMI | 54 | 53.3 | A stronger manufacturing reading may reinforce expectations for a resilient US economy and provide support for USD. Market focus remains on growth data and Fed policy expectations. |
| 5 Aug | NZD | Unemployment Rate | 5.40% | 5.30% | A rise in unemployment may signal further labour market cooling, increasing pressure on NZD as markets assess the RBNZ’s rate outlook. |
| 7 Aug | CAD | Unemployment Rate | 6.50% | 6.50% | A stable unemployment rate may reinforce expectations for a steady Canadian labour market. Employment trends remain key drivers for CAD volatility and rate expectations. |
| 7 Aug | USD | Unemployment Rate | 4.20% | 4.20% | A stable unemployment rate may reinforce expectations for a resilient labour market. |
| 7 Aug | USD | Non-Farm Employment Change | 88K | 57K | Payroll growth remains the week’s key volatility driver across FX, gold and equity markets. |
For a full view of upcoming economic events, check out VT Markets’ Economic Calendar.
Key Movements of The Week
USDX
- The US Dollar Index eased towards the 99.35 monitoring area.
- Resistance near 100.20 remains the primary technical level if the dollar rebounds.
- Traders may look for confirmation before positioning around the current support zone.
EURUSD
- EUR/USD extended higher following recent consolidation.
- Resistance around 1.1585 to 1.1600 remains the next area to monitor.
- Continued consolidation above support may favour another attempt higher.
XAUUSD (Gold)
- Gold failed to close above 4,117 and continues trading within a narrow range.
- A break above resistance or below support around 4,020 and 3,995 could determine the next directional move.
- Patience remains important while price consolidates, with confirmation preferred before entering new positions.
SP500
- The index advanced towards the 7,550 monitoring area following improving market sentiment.
- Consolidation around current levels could determine whether bullish momentum extends.
- Price action around resistance may provide early signals for the next trend.
BTCUSD
- Bitcoin retreated from the monitored resistance zone.
- Further consolidation could expose downside towards the 63,800 area.
- Traders should monitor momentum closely before anticipating a sustained recovery.
Bottom Line
Markets are entering a week where corporate fundamentals and macroeconomic data are likely to shape sentiment together. Investors continue supporting companies capable of converting AI investment into measurable earnings while becoming more selective towards businesses with longer paths to profitability. At the same time, Friday’s US employment report has the potential to drive volatility across the US dollar, gold, equities and major currency pairs. Technical levels across key markets suggest several assets remain close to important breakout zones, making confirmation and strict adherence to essential trade risk management tips increasingly important as fresh economic data enters the market.
Create a live VT Markets account today to access our platform features, including market insights and educational content.
FAQs
What is changing in how investors evaluate AI investments?
Investors are shifting focus from pure capital expenditure, such as buying chips and building data centers, to demanding measurable financial returns. Companies are now evaluated on their ability to translate AI investments into sustainable revenue, expanding margins, and free cash flow.
How are Big Tech companies performing in this new AI phase?
Microsoft and Amazon continue to show strong AI demand through accelerating Azure and AWS cloud growth, backed by multi-year advance customer reservations. Meanwhile, Alphabet and Meta delivered solid operational results, but face greater scrutiny over whether rising infrastructure costs will yield long-term profitability.
What is the main macroeconomic driver for global markets this week?
The primary catalyst for market volatility is Friday’s US Non-Farm Payrolls (NFP) report. Economists expect non-farm employment to rise by 88,000 following a previous reading of 57,000, while the unemployment rate is projected to hold steady at 4.2%.
How could the US jobs report impact market sentiment and assets?
A stronger-than-expected payroll report would reinforce confidence in the US economy and support the US dollar. Conversely, softer employment data could raise expectations for Federal Reserve policy easing, lifting demand for safe-haven assets such as gold.
Start trading now — click here to create your real VT Markets account.
