US Dollar, Apple Earnings, Fiscal Forecasts – Talking Points
- The US Dollar may rise after Apple Inc. publishes Q1 earnings
- Greenback could get additional boost from CBO fiscal forecast
- EUR/USD selloff may accelerate on Apple earnings, coronavirus
The US Dollar may rise if Apple’s earnings for Q1 exceed expectations and boost market mood amid the contagious “risk off” effect of the coronavirus. The Greenback may also get an additional boost after the non-partisan Congressional Budget Office publishes its annual US budget and economic outlook. A stronger emphasis on the need for fiscal measures in light of their anticipation for lower interest rates may amplify USD’s rise.
Apple Q1 2020 Earnings Forecast
Apple Inc, a company with an over-1 trillion-dollar market cap, is expected to show revenue growth of $88.38 billion, a 4.8 percent increase on a year-on-year basis. As the second-largest company in regard to its weighting in the S&P 500 index at 3.83 percent, financial reverberations in the stock price of APPL has a relatively larger impact on the equity index relative to its counterparts. As such, it has the capacity to induce market-wide volatility.
Congressional Budget Office
The Congressional Budget Office’s (CBO) prior forecasts published in January 2019 had comparatively higher projections when it came to where interest rates would be between 2019 and 2029. Policymakers wrote: “The agency now expects short- and long-term interest rates over the coming decade to be lower, on average, by 0.5 percentage points and 0.8 percentage points, respectively”.
With interest rates expected to be lower in the long-term, much like in the Eurozone and with the ECB, US officials may start to place a greater emphasis on using fiscal means to achieve growth objectives. This comes as the stimulatory effect of loosening credit conditions – which are already at historically low levels – diminishes since the baseline of where officials began cutting is already comparatively shallow.
EUR/USD Technical Analysis
EUR/USD has broken below both the lower cusp of the 1.1121-1.0918 (gold-dotted lines) congestive range and the October uptrend (labelled as “beta”). The pair now has the formidable task of recovering its losses as it trades at two-month lows just below support at 1.1039 (white-dotted line). Looking ahead, if demand for havens like the US Dollar continue, the extent of EUR/USD’s decline may venture into to 1.0989.
EUR/USD – Daily Chart
EUR/USD chart created using TradingView
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
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