Early Morning Call: USD at 1-year low after more soft US data while gold nears record high

USD continues to weaken

US equity markets rose in Thursday’s session, as the dollar continued to weaken after the release of a couple of US indicators.

After US CPI on Wednesday, US producer price index for March, released yesterday, dropped the most since April 2020, while initial jobless claims rose more than expected. As the US dollar weakens, gold is on track for a second consecutive week of gains.

Now the market awaits US retail sales at 1.30pm. Economists anticipate the index to fall by 0.4% in March month-on-month (MoM). It will be followed at 2.15pm by industrial production, forecast to rise 0.2% in March compared to February, and Michigan consumer sentiment which should remain at 62 in April.

Asia-Pacific indices followed the US lead overnight and European equity markets opened higher this Friday.

US earnings

US earnings will be the main focus, with reports expected from three of the largest US banks.

JPMorgan Chase, the largest US bank by assets, is scheduled to release its first quarter (Q1) earnings before the US market opens. The market expects the bank to post earnings of $3.41 per share, an increase of about 24% on the same quarter a year ago. Revenue is forecast to rise 14% to $36.13 billion.

As ever, forecasting for the months to come will be key. As the economy is expected to slow later this year, investors will be particularly focused on the amount banks will set aside to cover potential loan losses. In the case of JPMorgan, analysts anticipate a provision for credit losses in the region of $2.25bn.

The flow of deposits will be also closely watched. With the collapse of Silicon Valley Bank and Signature Bank, we saw deposits leaving smaller regional banks for larger ones. But since the same big banks agreed to rescue First Republic Bank, concerns appeared on whether the crisis that hit regional banks had spread to the broader banking system.

Citigroup is also set to report its quarterly earnings before the opening bell. Earnings are expected at $1.70 per share, on revenue of just over £20bn, and Wells Fargo is forecast to post earnings of $1.12 per share on revenue of $20.12bn.

Elsewhere on the equity market, Superdry says it is considering an equity raise, and has withdrawn its profit guidance for the current year of “broadly breakeven”.

Boeing, meanwhile, announced late last night it is halting the production of some 737 aircrafts over supplier issues.

Commodities

On the commodity market, WTI and Brent are poised to post a fourth straight week of gains.

Traders will remain attentive to the evolution of coffee prices. The coffee rally continues as traders express concerns about weather conditions in Vietnam, the world's top robusta producer. London robusta coffee now trades at 11 1/2 year highs.

The market has so far been supported by tight supplies, and there are now concerns that dry conditions in Vietnam could dent the outlook for the 2023-24 crop.