Fed Chair Warsh Speaks at Jackson Hole

Federal Reserve Chair Kevin Warsh will speak at the Jackson Hole symposium on Friday, with markets looking for clues on the Fed's next move. His appearance comes at a difficult time for U.S. markets, with public debt above $40 trillion, the 30-year Treasury yield recently hitting its highest level since 2007, and oil prices elevated by the Middle East conflict.

Warsh has also faced criticism for providing limited forward guidance, so investors may be hoping for more clarity on rates. However, this year's symposium is focused on financial innovation and payments rather than monetary policy, so a detailed policy signal is far from guaranteed.

Even so, markets are finely balanced. Around 65% of traders expect the Fed to leave rates unchanged in September, meaning even a small shift in Warsh's language could move the dollar, Treasury yields and Gold.

The speech will come after July core PCE, the Fed's preferred inflation measure, which is expected to remain at 3.3%.

A softer PCE reading and a cautious Warsh could put further pressure on the dollar and yields, while lifting Gold, which trades at an almost 3-month high. The 50 EMA is also on the verge of crossing above the 200 EMA, which is a gold cross bullish signal. A hawkish message, particularly on inflation, could quickly reverse that move.

Nvidia Q2 Earnings

After falling 1.4% last week and ending three consecutive weeks of gains, U.S. stocks will have another major test on Wednesday when Nvidia reports earnings. The chipmaker is increasingly viewed as the clearest test of whether the AI rally still has room to run.

Revenue is expected to approach $92 billion, with EPS forecast at $2.09 and oth earnings and revenue growth are projected to be close to 100% year-on-year.

But another earnings beat is unlikely to be enough. The market will be looking closely at Q3 guidance and whether gross margins can remain around 75%. With Nvidia trading only around 8% below its record high, the bar remains extremely high.

That matters because semiconductor stocks have struggled to hold onto recent gains as investors question whether the enormous spending on AI infrastructure will ultimately generate sufficient returns.

A strong outlook could reignite the AI trade and lift the broader market and the S&P 500. Any sign that demand is slowing, or margins are coming under pressure, could do the opposite.

Tokyo Inflation and USD/JPY

The yen remains surprisingly weak despite the recent decline in the U.S. dollar.

The dollar index fell almost 0.9% last week, yet USD/JPY slipped just 0.2%, suggesting investors remain reluctant to make a sustained bet on a stronger yen.

Tokyo inflation will therefore be important this week, alongside U.S. core PCE and Warsh's Jackson Hole speech.

The market will be watching to see whether price pressures in Tokyo continue to build. A weaker reading could reduce expectations for a September Bank of Japan hike and put renewed pressure on the yen.

A stronger inflation reading would keep the prospect of a September hike alive, particularly if the Fed is also signalling a more cautious approach to U.S. rates. For USD/JPY, the policy divergence remains the key. A more hawkish BoJ alongside a less hawkish Fed would give the yen its clearest opportunity to recover. A break below the 200 EMA would be significant.