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What Have First Quarter Earnings Revealed About FX Markets?

What Have First Quarter Earnings Revealed About FX Markets?

2019-05-01 21:45:00
Peter Hanks, Analyst
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First Quarter Earnings and FX:

  • Apple has cited increased competition in China, contributing to waning iPhone sales
  • Elsewhere, Google has warned a stronger US Dollar will weigh on revenue
  • See how IG Clients are positioned on the S&P 500 with Retail Sentiment Data

What Have First Quarter Earnings Revealed About FX Markets?

With earnings season entering the latter half, investors and traders have already heard from some of the country’s largest and most influential corporations. Aside from their immediate stock price reaction and influence over the index on which they trade, anecdotal evidence from some key players highlight themes that US stocks will face heading into the second quarter.

Apple’s Problems in China

After delivering results above expectations, Apple’s share price climbed – but not everything in the report was quite as rosy. As with prior quarters, Apple highlighted waning demand in China and increased competition. In turn, total iPhone sales slipped to $31.05 billion. In China specifically, iPhone sales slumped to $10.2 billion compared to $13 billion in 1Q 2018. That said, Apple CEO Tim Cook was optimistic.

What Have First Quarter Earnings Revealed About FX Markets?

“I believe that the trade relationship — I don’t mean the tariff, I mean the tone — is much better today than it was in the November-December time frame. That affects consumer confidence in a positive way,” Cook said. The CEO’s comments align with progress cited by US and Chinese officials as the US-China trade war looks to be winding down. While Apple’s situation shows signs of improvement, Google may find itself in deeper trouble.

Google and a Strong US Dollar

In their first quarter report, Google blamed a strong US Dollar as one of the headline reasons behind their earnings miss. Company officials listed several foreign currencies that have weakened versus the Dollar including the British Pound, Euro, Brazilian Real and Indian Rupee. Further, Google said earnings were dented $1.2 billion by a strong USD in the quarter alone – which was larger than their $1 billion miss on revenue. The company said it expects foreign currency to be an issue again in the current quarter.

What Have First Quarter Earnings Revealed About FX Markets?

After Wednesday’s FOMC decision revealed that Fed officials do not see a case for a rate move either way, the Dollar could look to continue higher on the back of its range breakout last week. As earnings season begins to wind down, follow @PeterHanksFX on Twitter for equity insight.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Why Central Bank Monetary Policy May Fail to Avert Another Market Swoon

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