Week Ahead: US Core PCE, NVDA earnings, German, Australian CPI & Canada GDP  

Weekly Recap 

After spending the week waiting for Federal Reserve chair Jerome Powell’s speech at Jackson Hole, the market wasn’t disappointed. Powell’s dovish lean and hint towards a possible rate cut in September resulted in the Dow rallying just shy of 1000 points on Friday, whilst the Nasdaq gained 1.6% and the S&P 500 rebounded back towards record highs. The USD fell, giving back the week’s gains. 

While Fed chair Powell noted the US economy is facing challenges, inflation risks persist, and the job market has cooled. He said that “the shifting balance of risks may warrant adjusting our policy stance”. The dovish tone saw the market ramp up rate cut expectations and is pricing in an 87% chance of a 25 basis point rate cut in the September meeting. 

Nvidia (Wednesday) 

NVIDIA will report Q2 earnings after the close on Wednesday, and after recent volatility in the share price. While investors haven’t lost faith in AI, there are some doubts over its timeline. Nvidia’s results could calm or fray investors nerves. Given that Nvidia is the dominant AI play, its results can impact broader market sentiment. The stocks account for 8% of the S&P 500. 

Expectations are for a 48% rise in earnings on revenue of $45.9 billion, marking 52% growth, a notable deceleration from previous quarters. The results come after a report from MIT, which said that although companies are rushing to adopt AI, most have something to show for it, which sent Nvidia’s share price sharply lower. While the share price rebounded on Friday after Powell’s speech, the sector remains fragile, and these results will reveal how investors feel about the whole AI trade. 

Details to watch include demand for Blackwell chips, which are expected to account for 80% of high-end graphics this year. Supply is still tight, but that is expected to ease by the end of the year. China is another area to watch after US export bans to China may have cost $8 billion. Finally, margins are expected to bounce back to 75% from 60.5% in Q1, should Blackwell ramp up smoothly. 

Australia CPI (Wednesday) 

Australian CPI for July is expected to rise to  0.5% month on month, taking the annual rate to 2.3% up from 1.9% in June. The RBA’s August projection points to headline inflation rising above 3% in the second half of the year before easing back; therefore, the market will focus on whether July CPI confirms upside pressure on prices. A stronger-than-expected print could push back RBA rate cut expectations and lift AUD/USD higher. The RBA cut rates by 25 basis points to 3.6% in the August meeting in a widely expected and unanimous decision, and reiterated that inflation has continued to ease, but the outlook remains uncertain.  

Tokyo CPI (Thursday) 

Tokyo CPI is considered a good lead indicator for the national CPI reading, which influences the Bank of Japan’s decisions regarding interest rates. Expectations are for Tokyo CPI to slow to 2.6% YoY, down from 2.9% annually, owing to softer energy prices, although fresh food remains firm. Markets will be watching out for stickiness within service inflation. Any upside surprise could add to expectations that the Bank of Japan will be gradually shifting its monetary policy towards a more hawkish bias, lifting the yen and pulling USD/JPY lower. Markets are currently pricing in 19 basis points worth of rate hikes this year, so no move by the BoJ until 2026. Hotter inflation could bring this forward. 

German CPI (Friday) 

German inflation is expected to show a slight increase in price pressures to 2.1% YoY in August, up from 2% in July. However, the weak growth outlook and lower energy prices mean pressures could tilt to the downside. The data comes after mixed figures from the eurozone’s largest economy last week, including a deeper-than-expected contraction in Q2 GDP, and slightly stronger-than-forecast PMI data. However, ECB president Christine Lagarde has warned of a deteriorating growth outlook for the broader eurozone region. With inflation in Germany on target at 2% the ECB has the luxury of being able to wait to assess the impacts of Trump’s trade deal on inflation before moving again on rates. The central bank is widely expected to cut rates again before the end of the year. Cooler than expected German CPI could see the market ramp up rate cut expectations, pulling EUR/USD lower.  

Canada GDP (Friday) 

In May, Canada’s GDP fell 0.1% month on month; however, it is expected to rebound to 0.1% growth in June, which would result in underlying growth in Q2 being a bit slow at 0.1%. The data comes as the Bank of Canada is currently pausing its rate-cutting cycle. Still, the latest minutes reveal a division between policymakers, with some policymakers believing they have provided enough support to the economy, while others believe further cuts are necessary. The minutes also noted that the economy may have slowed in Q2 after solid Q1 growth, as front-loading activities faded in the April to June period. Since the latest meeting, inflation data has cooled slightly, boosting BoC rate cut expectations with 24 basis points of easing priced in before the end of the year. Weak growth data could weigh on demand for the loonie, lifting USD/CAD higher. 

US core PCE (Friday) 

The main event this week will be US core PCE data, the Fed’s preferred gauge for inflation, which could provide further clues to the Fed’s future path of rates. In July, CPI data rose in line with expectations (+0.2% MoM, core CPI +0.3%). However, PPI surged, jumping 0.9% well ahead of expectations of 0.3%. However, the jump in PPI could have limited implications for core PCE, given that most of the components feeding into the data only showed a slight to moderate increase. Still, the market would be watching for any evidence that Trump’s tariffs are generating cost pressures within the supply chain, which could be passed on to the consumer. Core PC is expected to rise 0.3% in line with June. Meanwhile, the annual rate is expected to rise to 2.9% up from 2.8%. The data comes after Federal Reserve chair Jerome Powell, in his speech in Jackson Hole, hinted to the Fed cutting rates in September. Cooled that forecast core PCE could pull USD lower, affecting USD crosses such as GBP/USD. 

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