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What’s happening: The US dollar recorded gains on Tuesday, as investors braced for high volatility in the stock markets.
What happened: A spike in stock market volatility amid the ongoing earnings season and concerns around the global economic outlook provided a boost to safe-havens on Tuesday.
Gains in the US dollar were somewhat limited by reports of increased de-dollarisation moves by central banks.
Why it matters: The US dollar started this week in the negative zone, losing around 0.5% on Monday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, is down around 3.3% since the beginning of March.
The greenback rebounded on Tuesday, ahead of a big week for earnings and economic reports. In fact, the appeal for all safe-havens, including the Japanese yen and gold, remained elevated on Tuesday.
The US announced a decline in consumer confidence to its lowest level since July 2022. The Conference Board’s consumer confidence index fell to 101.3 in April, versus 104.0 in the prior month. The US Richmond Fed manufacturing index also declined to -10 in April, from a reading of -5 a month ago, as higher interest rates exerted pressure on business activity.
The US released strong housing data, which showed sales of new single-family houses surging 9.3% to a one-year high of 683,000 in March. The figure also topped market estimates of 630,000.
Concerns around the banking sector resurfaced after UBS and First Republic Bank reported weak results.
The greenback’s appeal was somewhat limited by reported of central banks turning away from the US dollar to gold for their reserves and several countries shifting to alternative currencies to carry our international trade.
The US dollar index gained around 0.5% to 101.86 on Tuesday. The EUR/USD forex pair fell around 0.6% to 1.0977, after adding 1.7% so far in April. The GBP/USD also declined by around 0.6% to reach 1.2409 but remained close to its 10-month high of 1.2545 hit earlier in the month.
What to watch: Traders will keep an eye on moves by the US Federal Reserve, which is expected to announce another rate hike of 25bps at its meeting next week.
Markets also await data on durable goods orders, wholesale inventories and goods trade balance, scheduled to be released today. Data on GDP growth in the first quarter and consumer sentiment, due later this week, will remain in focus.
Context: Shares of Alphabet gained in the after-hours trading session on Tuesday, following better-than-expected quarterly results.
Details: Alphabet saw higher demand for cloud services last quarter, which provided a boost to its overall results. Google Cloud revenues jumped to $7.5 billion in the quarter, from $5.8 billion in the year-ago quarter.
Although the company recorded a slight decline in quarterly ad sales to $54.55 billion, the figure topped market views of $53.71 billion. The recent release marked the third decline in ad sales since the company went public in 2004.
YouTube ad revenues also slipped by 2% to $6.69 billion in the quarter, but exceeded market expectations.
Overall quarterly revenues grew by 3% year-over-year to $69.79 billion, surpassing the consensus estimates of $68.9 billion. Earnings came in at $1.17 per share, topping Wall Street expectations of $1.06 per share.
The company also said its board had authorised a share buyback program worth $70 billion.
How shares responded: Alphabet’s shares gained 1.8% to $105.47 in the after-hours trading session, following the release of quarterly results. The stock has added around 9% over the past six months.
What are expectations: Investors will keep an eye on Alphabet’s new unit, Google DeepMind, which will accelerate the company’s progress in artificial intelligence. The new unit is scheduled to begin reporting results in the second quarter.
Other Markets: European indices closed mostly lower on Tuesday, with the FTSE 100, CAC 40 and STOXX Europe 600 down by 0.27%, 0.56% and 0.40%, respectively, and the DAX 40 up by 0.05%.
A report by the Stockholm International Peace Research Institute showed global military expenditure climbing 3.7% to a record high of $2,240 billion in 2022, driven by the Russia-Ukraine war. The safe-haven US dollar index fell slightly this morning.
New Zealand reported a wider trade deficit of NZ$1.273 billion in March. However, exports growing 0.6% to $6.5 billion lent support to the NZD/USD forex pair.
South Korea’s Composite Consumer Sentiment Index rose 3.1 points to a new nine-month high of 95.1 in April, sending the KRW/USD pair higher in forex trading this morning.
The API said that US crude stockpiles had contracted by 6.083 million barrels in the week ended April 21. The figure coming in higher than market estimates of a decline of 1.667 million barrels lent support to WTI crude oil prices this morning.
Argentina’s retail sales surged 132.8% year-over-year in February. However, this marked a deceleration from 151.2% growth in the earlier month and sent the ARS/USD pair slightly lower in forex trading this morning.
Germany’s GfK consumer climate indicator, France’s consumer confidence, unemployed persons and initial jobless claims, UK’s labour productivity and CBI distributive trades survey’s retail sales balance, South Africa’s producer prices change, US MBA mortgage applications, crude oil inventories, gasoline stocks and distillate stocks, Brazil’s bank lending and consumer prices, Canada’s manufacturing sales, Russia’s industrial production, as well as Indonesia’s foreign direct investments.
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