The Week Ahead: Oracle earnings, ECB rate decision, US inflation

Many traders will be paying close attention to economic events on each side of the Atlantic in the week ahead, with both the European Central Bank’s interest rate decision and the latest US consumer price data due on Thursday. 

The ECB’s rate meeting should give traders a better sense of where eurozone monetary policy is heading in the near term and its potential impact on the euro. Meanwhile, US inflation figures will play a key role in shaping the Federal Open Market Committee’s thinking ahead of its own rate decision on 17 September. Prior to these announcements, Oracle will release its first-quarter results on Tuesday, giving the market an update on tech and artificial intelligence trends. 

Oracle Q1 earnings

Tuesday 9 September 

Analysts expect Oracle to report that Q1 earnings grew 6.6% year-on-year to $1.48 a share as revenue rose an estimated 13% over the same period to $15.0bn, with gross margin slipping to 70.0% from 71.8% a year ago. Looking ahead to the fiscal second quarter, analysts forecast earnings of $1.62 a share on revenue growth of 15.3% to $16.2bn, with a gross margin of 70.1%. The tech group’s shares – up 34% this year at $223, as of Thursday’s close – could rise or fall around 8% following the Q1 results, based on options market positioning.

Options traders appear to be taking a bearish stance against the New York Stock Exchange-listed company, whose shares have fallen more than 10% from the year-to-date highs they reached in early August. Further analysis indicates that $215 (the uppermost dotted orange line on the chart below) could be a key level of support for Oracle, should the stock fall after it publishes its Q1 results. A break below this level could send the share price down towards $175, filling a gap that was created after the previous earnings release. 

Momentum, as measured by the relative strength index (RSI), has declined to 35, just above the 30-mark that typically represents oversold territory, suggesting that the stock may have further to fall in the near term. Upside potential seems more limited, with strong resistance around $240. The S&P 500 constituent may need to deliver very strong results on Tuesday to break through this barrier. Moreover, the stock’s recent weakness could be a warning sign ahead of the release.

Oracle share price, October 2024 - present

^{Sources: TradingView, Michael Kramer}

ECB interest rate decision

Thursday 11 September 

The market expects the ECB to keep interest rates unchanged at its upcoming meeting. And it might be a while before rates are lowered again – markets are pricing in the next rate cut for March 2026. However, eurozone inflation ticked up to 2.1% in the year to August, casting doubt over the prospect of further reductions to the cost of borrowing.

With the Federal Reserve expected to cut rates this month and the ECB likely to signal that it intends to keep rates on hold, the near-term outlook should be supportive for the euro. However, after its upward move in the first half of the year, EUR/USD has moved sideways since July. The pair has failed to break out of the trading range around $1.17, and in the past month the RSI has also moved sideways, underlining the lack of momentum. 

That said, the period of stagnation may be drawing to a close. As highlighted on the below chart, the long-term uptrend and shorter-term downtrend are converging, hinting at the potential for a breakout. If EUR/USD resumes its long-term uptrend, it could soon retest $1.18.

EUR/USD, August 2024 - present

^{Sources: TradingView, Michael Kramer}

US August CPI

Thursday 11 September 

Economists estimate that US consumer prices increased 0.3% month-on-month in August, accelerating from 0.2% in July, while the core consumer price index (CPI) – which excludes volatile food and energy prices – is forecast to remain unchanged. These figures may be Fed hawks’ last hope of avoiding a first rate cut of 2025. Unless there’s a sharp spike in inflation, it’s likely that on 17 September policymakers will vote to cut the benchmark interest rate by 25 basis points to a target range of 4% to 4.25%. 

The inflation data may also represent the dollar’s last chance for support. The dollar-yen pair, currently trading near ¥148 per dollar, has been behaving somewhat unusually of late. As rates in Japan rise, the interest rate differential with the US has been narrowing. Typically, contracting spreads would be expected to lead to a stronger yen. However, USD/JPY has been trading sideways, much like EUR/USD.

A CPI report broadly in line with consensus estimates could give the Fed the cover it needs to cut rates later this month. In that scenario, the yen may strengthen versus the dollar, potentially sending USD/JPY down towards ¥143, and possibly to lower levels over time.

USD/JPY, January 2022 - present 

^{Sources: TradingView, Michael Kramer}

Economic and company events calendar

Major upcoming economic announcements and scheduled US and UK company reports include:

Sunday 7 September

• Japan: Q2 gross domestic product (GDP)

Monday 8 September

• Germany: July industrial production, July trade balance
• UK: August like-for-like retail sales
• Results: Phoenix Group (HY)

Tuesday 9 September

• Australia: September Westpac consumer confidence index
• Results: AeroVironment (Q1), Caseys General Stores (Q1), Computacenter (HY), Core & Main (Q2), Dunelm (FY), GameStop (Q2), Oracle (Q1), Rubrik (Q2), SailPoint (Q2), Synopsys (Q3)

Wednesday 10 September

• China: August consumer price index (CPI)
• US: August producer price index (PPI)
• Results: Chewy (Q2), Pan African Resources (FY), Vistry (HY), Wickes (HY)

Thursday 11 September

• China: August exports, imports and trade balance
• Eurozone: European Central Bank interest rate decision 
• US: August CPI, weekly initial jobless claims
• Results: Adobe (Q3), Energean (HY), Fever-Tree Drinks (HY), Kroger (Q2)

Friday 12 September

• Eurozone: August harmonised CPI
• France: August CPI
• UK: July GDP
• US: September flash Michigan consumer sentiment index
• Results: No major scheduled earnings announcements

Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.

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