DAX rises as Nvidia boosts AI trade ahead of Jackson Hole
The DAX is trading cautiously higher on Thursday, supported by technology stocks after Nvidia's strong outlook helped revive the AI trade. However, gains remain relatively contained as investors position cautiously ahead of the Jackson Hole symposium and Friday's speech from Fed Chair Kevin Warsh.
Nvidia reported EPS of $2.22, ahead of the $2.10 expected, while revenue came in at $96.22 billion, above the $92.17 billion forecast. More importantly, the company expects fiscal 2028 revenue growth of 70%, well ahead of the 44% expected by analysts.
This matters for the DAX because the index has significant exposure to technology and industrial companies benefiting from the AI investment cycle. Siemens Energy, which supplies turbines used in data centres, is up 2.3%, while SAP is around 1% higher.
The stronger Nvidia outlook helps address one of the main concerns around the AI trade — whether earnings growth can continue to justify elevated valuations. For the DAX, continued strength in AI-related stocks could help push the index back towards its record high.
However, the macro backdrop remains less straightforward.
Attention now turns to Jackson Hole, with markets looking for clues from Kevin Warsh on the outlook for U.S. interest rates. Sticky inflation remains a concern, while weaker economic data has reduced expectations of aggressive Fed tightening. A hawkish message from Warsh could push yields and the dollar higher, creating a headwind for equities.
The Middle East is another factor to watch. Oil prices are down around 6% this week as hopes of a ceasefire improve, which is positive for European equities given the region's exposure to energy prices.
However, the energy situation remains a risk. European gas prices are close to their highest level in more than three years, while German gas storage is only around half full heading into the winter.
That leaves the DAX caught between two competing forces: stronger AI earnings supporting equities, while energy prices and monetary policy remain potential headwinds.
DAX forecast – technical analysis
The DAX remains above its rising trend line and 50 and 200 EMAs, keeping the broader trend constructive.
The recovery from 25,900 has brought the index back towards 26,580, the record high. A break above this level would create a fresh record high and bring 27,000 into focus.
On the downside, 25,900 is the first important support. A break below here would expose the 50 EMA and rising trend line around 25,550.
Below this area, attention turns to 25,000, followed by the 200 EMA around 24,700. A break below the 200 EMA would materially weaken the broader bullish structure.
GBP/USD slips below 1.36 as Fed expectations shift
GBP/USD is edging lower for a second straight day, trading below 1.36 as the U.S. dollar recovers from last week's three-month low.
The dollar has found some support from the latest PCE data. Core PCE rose 0.2% month-on-month, above the 0.1% expected, while the annual rate remained at 3.3%. Headline PCE was also slightly hotter than expected at 3.7%.
The numbers don't point to an immediate inflation problem, but they do make it harder for the Fed to become significantly more dovish. That has helped limit the dollar's downside ahead of Warsh's speech.
The key issue for GBP/USD is now the relative outlook for the two central banks.
UK rate expectations have cooled, with markets pricing less than 4 basis points of BOE tightening for September, implying around a 15% probability of a hike. This is despite UK CPI rising to 2.9% in July.
The reason is that the UK labour market continues to weaken, making it difficult for the BOE to respond aggressively to higher inflation if domestic demand is losing momentum.
That leaves GBP/USD particularly sensitive to Friday's Jackson Hole speech. A hawkish Warsh could widen the policy gap and push GBP/USD towards 1.35, while a cautious Fed message would give Sterling another opportunity to retest the recent highs.
GBP/USD forecast – technical analysis
GBP/USD remains within an ascending channel but has struggled around 1.3675, the upper band of the channel.
Buyers will need to break above 1.3650–1.3675 to regain momentum and bring 1.37 into focus, followed by 1.38.
On the downside, 1.3550 is the first important support. A break below here would expose 1.35, while a move below the 200 EMA around 1.3415 would change the near-term technical picture more significantly.
For now, the fundamental and technical picture is finely balanced: Sterling has the benefit of the broader rising trend, but the dollar could regain ground quickly if Warsh gives markets a reason to price Fed tightening more aggressively.
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