Since President Trump was elected in November the US Dollar has been steamrolling pretty much all other currencies except for precious metals and cryptos (and even those sometimes as well), supported by rising US treasury yields and fewer rate cuts from the Fed relative to other central banks.
So far this earnings season, the higher US Dollar does not seem to have impacted corporate earnings but that may be starting to change. Last night, Amazon.com* beat the street on earnings ($1.86 vs street $1.49) and overall sales. The shares are down 2.3% premarket, however, after clawing back deeper overnight losses, as investors reacted negatively to soft cloud revenues and a weaker than expected sales growth forecast. In particular, traders were rattled by management comments that the higher US Dollar could have a negative impact of $2.1B on next quarter’s results. From what I can tell, Amazon is the first really big company to warn on the potentially negative impact of a higher US Dollar moving forward but it is important to pay attention to as this could be the start of a trend for US exporters and multinationals.
North American employment numbers were mixed. US Nonfarm Payrolls missed but that can be accounted for by an upward revision to last month (143K street 170K, previous revised up to 307K from 256K). Canada employment was very strong (76K street 25.0K vs previous 91K). US Average Hourly Earnings (4.1% vs street 3.8%) indicate increasing wage inflation pressures.
US index futures are pretty much flat on all of this news. In Europe, the Dax is down 0.1% and the FTSE is down 0.3%. The US 10-year treasury note yield is steady near 4.45%. Currencies are quiet except for a 0.3% gain for Gold and a 1.5% gain for Bitcoin. Commodities are picking up with Crude Oil gaining 0.6% and Copper climbing 1.5%.
*Shares of Amazon.com are held in some portfolios managed by SIA Wealth Management.