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  • Downbeat RBA meeting minutes trigger risk-off G10 FX response
  • German ZEW, US industrial production, BofA results due ahead
  • S&P 500 companies’ earnings on pace to fall in the first quarter

A downbeat tone in minutes from April’s RBA meeting triggered a broadly risk-off response from financial markets, as expected. The Australian Dollar plunged alongside its similarly sentiment-sensitive Canadian and New Zealand counterparts while the anti-risk US Dollar and Japanese Yen gained. Crude oil tellingly fell with Treasury bond yields.

The central bank reportedly discussed scenarios wherein it might need to cut rates, reinforcing the recent dovish shift in official rhetoric. Separately, RBNZ Governor Adrian Orr said he and his colleagues are operating with an easing bias which is yet to challenged by incoming economic data, reinforcing worries about a downshift in the international business cycle.

Looking ahead, Germany’s ZEW survey of analysts’ sentiment and US industrial production figures may amplify global slowdown fears. Macro data flow out of both countries has tended to underperform relative to baseline forecasts in recent months. The first-quarter earnings report form Bank of America may add to pressure if it echoes yesterday’s lackluster results from Goldman Sachs and Citigroup.

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US Dollar May Rise on Growth Angst. S&P 500 Earnings to Fall?

The on-going slide in global growth may bring the first quarter of negative corporate earnings growth in three years. JPMorgan Global PMI data shows the pace of expansion in nonfarm activity has been slowing since the beginning of last year. Data from Bloomberg reveals that this began to show up in the performance companies comprising the bellwether S&P 500 stock index in the fourth quarter of 2018.

The drop appears to be accelerating, with first-quarter results published thus far implying earnings are on pace to fall 4.3 percent on-year. It is important not to overstate this. After all, just under 7 percent of the companies represented in the index have reported thus far. That means a more benign outcome may yet be in the cards. A more malignant one is likewise a possibility however.


--- Written by Ilya Spivak, Currency Strategist for

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