Tech Drives Market Gains as Investors Eye Inflation Report and Rate Cuts | Daily Market Analysis

Key events:

• UK - GDP (MoM) (Jul)
• USA - Core CPI (MoM) (Aug)
• USA - CPI (YoY) (Aug)
• USA - CPI (MoM) (Aug)
• USA - Crude Oil Inventories
• USA - 10-Year Note Auction

The S&P 500 reversed early losses to finish higher on Tuesday, as gains in tech helped counter declines in the energy and financial sectors ahead of a key inflation report. The S&P 500 rose 0.5%, the Nasdaq Composite climbed 0.8%, while the Dow Jones Industrial Average dropped 92 points, or 0.2%.

Tech stocks continued their upward momentum, aiding the broader market's recovery, though Apple (NASDAQ: AAPL) ended the day slightly down. This followed a ruling by the European Court of Justice requiring the company to repay €13 billion in back taxes, overturning a previous favorable decision.

The court ruling came shortly after Apple's unveiling of the iPhone 16 on Monday, set for release on September 20 with pre-orders beginning this Friday, in an effort to boost declining sales.

Analysts noted that the new iPhone and AI enhancements met expectations previously set during Apple's introduction of its AI initiative, "Apple Intelligence."

Meanwhile, Oracle (NYSE: ORCL) saw a significant pre-market boost after reporting stronger-than-expected fiscal Q1 results and optimistic guidance for Q2, fueled by robust demand for its cloud services. The company expects Q2 earnings per share to range between $1.42 and $1.46, surpassing the consensus estimate of $1.33.

The AUD/USD pair holds steady on Wednesday following comments from the Reserve Bank of Australia's Assistant Governor for Economics, Sarah Hunter. However, potential losses for the Australian Dollar may be limited as RBA Governor Michele Bullock's hawkish stance last week emphasized that rate cuts remain off the table amid persistently high inflation.

Assistant Governor Hunter noted that elevated interest rates are dampening demand, contributing to what is anticipated to be a mild economic downturn. She also highlighted that while the labor market remains tight compared to full employment levels, employment growth is likely to slow relative to population growth, according to Reuters.

Meanwhile, the GBP/USD pair gains positive momentum during the Asian session on Wednesday, reaching a fresh daily peak near the 1.3100 mark. However, spot prices remain below the previous day's swing high, warranting caution before expecting a sustained recovery from a three-week low around the 1.3050-1.3045 range.

On Tuesday, the UK Office for National Statistics (ONS) reported that unemployment-related benefit claims increased by 23.7K in August, down from 102.3K previously and well below the 95.5K expected. Additionally, the ILO Unemployment Rate decreased from 4.2% to 4.1% in the three months to July. A slowdown in wage growth is seen as positive for inflation, potentially providing the Bank of England with greater confidence in future rate cuts.

The NZD/USD pair reduces intraday losses, trading around 0.6150 during Wednesday’s Asian session. According to Morgan Stanley’s Chief China Economist Robin Xing, China is currently experiencing deflation, which could require significant stimulus measures to counter the debt-deflation challenge, potentially impacting New Zealand's markets due to close trade ties with China.

UOB Group FX strategists Quek Ser Leang and Peter Chia suggest that the New Zealand Dollar could drop below 0.6115, though support at 0.6085 is unlikely to be tested. They also indicated that as long as NZD remains under 0.6220, a break below 0.6150 is possible.

The USD/JPY pair faces continued selling pressure for the second consecutive day on Wednesday but finds support near 142.00, recovering a few pips to trade around 142.30. This drop is driven by the divergent monetary policies between the Bank of Japan and the Federal Reserve, leading to the unwinding of carry trades and favoring flows into the Japanese Yen. BoJ Governor Kazuo Ueda reaffirmed the central bank's commitment to raising rates if the Japanese economy meets the bank’s forecasts through FY2025.

Gold prices gain momentum for the third consecutive day on Wednesday, reaching a fresh weekly high of around $2,520-2,521 during the Asian session. However, the precious metal remains within a multi-week trading range as investors await key US inflation data set for release later today. This data will be crucial in shaping expectations for the Fed's potential rate cut at its upcoming September 17-18 meeting and could drive the next directional move for gold.

Meanwhile, the Fed’s anticipated easing cycle fails to bolster the US Dollar further, which has seen gains over the past three days, offering support to gold prices. Investor caution ahead of key inflation data is also evident from weaker equity markets, providing an additional boost to the safe-haven asset. However, bullish traders may want to wait for a move beyond the $2,525 supply zone before positioning for further gain