Insights 
VT 
The US dollar is experiencing gains as a new trading week begins, following a rebound after a dovish sentiment post-Jackson Hole. The chance of an interest rate cut in September is approximately 85%, down from higher levels last Friday. US yields are also up, with the two-year yield increasing by 3 basis points, and the 10-year up by 1.5 basis points.
Technical analysis of major currency pairs like EURUSD, USDJPY, and GBPUSD is a focus today, with UK markets closed for a holiday. The Ifo Business Climate report exceeded expectations with a reading of 89.0, and expectations for Q3 appear positive. Despite current conditions underrunning expectations, EUR sentiment sees mild support from the stabilisation aspects of the report.
Upcoming Nvidia Earnings
Nvidia’s earnings report on Wednesday is expected with $1.00 EPS and revenues of $45.94 billion, an increase compared to the previous year. Important events this week include speeches and data releases from Canada, Australia, and the US.
Current home sales data will be disclosed today, anticipating a slight increase from last month’s figures. In the premarket, US stock indices are trading lower, with declines seen across Dow, S&P, and NASDAQ. Meanwhile, US debt market yields are showing an upswing, particularly notable in the two-year and ten-year yields.
Following the Jackson Hole meeting, the US dollar is showing strength as the market slightly reduces its bets on an imminent rate cut. With US 2-year yields rising, the immediate path for the dollar seems higher, but this could be a short-term reaction. The key event will be the Core PCE inflation report on Friday, which will likely determine the Federal Reserve’s next move and could cause significant market swings.
Impact of German Economic Data
This week, all eyes are on Nvidia’s earnings report on Wednesday, where revenue is expected to have grown over 50% year-on-year. Looking back at the massive stock reactions to their earnings throughout 2023 and 2024, we know this event will heavily influence the NASDAQ and overall market sentiment. Options are pricing in a potential stock move of over 9% post-announcement, so we should prepare for significant volatility in the tech sector.
While the dollar is firm, the improved German IFO expectations data suggests some underlying resilience in the Eurozone. Recent PMI data also showed the German manufacturing sector, a weak spot for years, stabilizing near the 50 mark, adding to this cautious optimism. A weaker-than-expected US inflation number on Friday could give the EURUSD a strong reason to rally.
For currency pairs, the higher US yields will likely keep USDJPY supported in the near term, making it sensitive to any changes in Fed expectations. With the UK on holiday today, the GBPUSD is being driven almost entirely by the dollar’s momentum. We should be cautious about taking on large directional positions until after Wednesday’s Nvidia report and Friday’s crucial PCE data.
