U.S. stocks are slightly higher as a wide range of companies are starting to release earnings results. When looking at the top and bottom lines, we are seeing most results either beating or coming close to inline with expectations. The U.S. dollar is mixed again in what has been a lacklustre session so far. EUR/USD has stayed within a 20 pip range, while GBP/USD recapture tentatively recaptured the 1.30 handle with a 0.2% gain.
USD – Slight bid as U.S. Futures climb higher
Earnings – Lockheed crushes it and Verizon (NYSE:VZ) misses on subscriber growth
Brexit – Parliaments back from Easter break
Oil – Still riding high on U.S. decision on Iranian waivers
Gold – Drifts lower as earnings as geopolitical tensions ease
USD
The U.S. dollar has minimal gains against its major trading partners as investors await a wrath of earnings results this week and the release of U.S. Q1 GDP numbers on Friday. While the G10 central banks are all pretty much on the dovish side of things or just waiting for a few more months of data before reassessing their policy biases, we may see emerging market currencies outperform here. While we have not had any major updates on the trade front in recent days, an inevitable trade deal between China and U.S. could allow the Chinese to unleash more stimulus which would benefit EM.
Earnings
Peak earnings season is here, and a flurry of results are seeing many big names beat expectations, but cloudy outlooks are preventing some shares from soaring higher. Lockheed Martin (NYSE:LMT) delivered a strong beat on the EPS with a $5.99 result, much higher than the $4.34 expected by analysts. The world’s largest defence contractor also delivered strong guidance that topped estimates.
Verizon saw shares surge higher on the initial read of results, but the lower-than-expected subscriber gain is concerning and that is why shares erased most of their gains. Verizon decided not to have a lot of price promotions or giveaways like their competitors and that is why we are seeing weak subscriber numbers. The company did boost their outlook and are leading the way forward with 5G, so if we see any weakness, it may be short-lived.
Brexit
Parliament is back from Easter recess and May returns to calls for her to step down. Prime Minister Theresa May will hold a cabinet meeting today and will likely try to devise a plan to present a new withdrawal agreement bill to be voted on next week.
It appears not much has changed, May is under pressure, May is trying to get Labour on board, but talks seem to be going nowhere. A longer extension with someone new at the helm might be how this plays out. While no-deal Brexit is very unlikely, we may see bullish bets on cable fade on the failure to reach a deal before the European Parliament elections in May.
Oil
West Texas Intermediate crude continues to ride momentum from the U.S. decision to end waivers that for the last six months allowed eight countries to buy Iranian crude. Iranian oil minister Zanganeh noted, “U.S. dream to cut Iran’s crude exports to zero won’t be fulfilled.” He also noted that Iran has export deals with Armenia, Azerbaijan, Iraq and Turkey.
The U.S. decision on Iranian crude imports is one that will test OPEC + and possibly end the production deal. While Saudi Arabia has been over-delivered on their end of the cuts, we will probably see Russia less likely be interested in holding back production while the Saudis and U.S. are ramping up their levels.
Gold
Gold prices are softer on the day, mostly following the decline with European equities. The precious metal remains near the session lows as a wrath of earnings results from the likes of Twitter, Coca-Cola (NYSE:KO) and Harley-Davidson Inc (NYSE:HOG) delivered decent results. Safe-haven demand has been hurt by trade optimism and improving global growth prospects. If we continue to see better than expected earnings results, gold may continue to make fresh 2019 lows. Gold could find some support around the $1,250 level. While a better global economy will hurt demand for gold, the de-dollarization story could see central banks buy gold and provide a backdrop that would prevent a complete freefall.
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