Dovish FOMC expectations remain high; Google Earnings miss sink Nasdaq

This week has so many events that we could finally see some volatility come back to the markets.  Monday trade was the calm before an economic storm that will last the rest of the week.  Markets will focus heavily on updates on the trade front, European growth, China’s rebound, the Fed’s concern on soft inflation, the latest readings on the US labor market and big earnings reports.

USD – Softens on bearish month-end flows

China – PMIs and trade deal talks remain critical for further Chinese stabilization

S&P 500 – Reaches record highs ahead of busy week  

Google – Shares reverse from record highs on soft earnings

Oil – Slight rebound after largest drop of the year

Gold – Record highs on stocks mean tough times for safe-havens


The US dollar appears vulnerable ahead of month-end portfolio rebalancing and unwinding of positions ahead of trade talks, major economic data and the FOMC rate decision.   On Monday, rate cut bets for the Fed remained firmly anchored after the Fed’s preferred inflation gauge remained well below their 2% target level.  All data points suggest inflation is not going up anytime soon.  The Personal Income reading for March came in at 0.1%, lower than expected and also telling us that wage growth should not shock the Fed.


China’s official manufacturing PMI is expected to show the second quarter is showing stability with the domestic economy.  The April manufacturing reading is expected to remain steady at 50.5, while the services PMI is expected to tick higher to 54.9.  Seasonal factors were attributed for the rebound in March and early indicators are pointing to a possible weaker reading as Europe and South Korea indicators hinted at softer numbers.

The PBOC however is likely to keep this economy supported and if we do not see any derailments in trade talks between the US and China, further stabilization in growth momentum could benefit the commodity currencies.  Last week, President Xi gave assurances that should keep talks headed in the right direction.  If Treasury Secretary Mnuchin and US Trade Representative Lighthizer confirm progress on intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases and enforcement, we could see a final meeting scheduled in Mar-a-Lago later this month.

S&P 500

Stocks keep making fresh record highs ahead of jammed pack week full or earnings reports, trade deal talks, a Fed rate decision and major economic data from both China and the US.  Almost halfway through earnings season and so far we are seeing negative earnings growth around 1.5%, which is much better than the early forecast of -3.7%.  Expectations are for second quarter results to decline -0.7% and for earnings growth to resume in the second half of the year, with 2.1% growth in the third quarter and 8.6% in the fourth quarter.


Google parent company Alphabet Inc. reported a small revenue miss, surprising many analysts after we saw strong digital advertising results from Facebook and Amazon.  Google shares sharply reversed from record levels.  Total cost and expenses rose over 26% as YouTube moderation costs grow and the company develops their cloud business team.  Nasdaq futures are trading down on the Google miss and we could see that derail any momentum going into Asia.


Crude prices rebounded on what was a quiet day on the news front for oil.  After almost falling 3% on Friday, the largest drop of the year, West Texas Intermediate crude rebounded 0.5%.  The focus in the oil markets remains the May 2nd expiration of US exemptions on Iranian crude oil purchases.  The shortfall is expected to be made up by the Saudis and UAE, but Saudi Arabia does not appear to be immediately increasing production.  Oil appears to have some short-term support on the Saudi delay in increasing production and the potential weakening US dollar on a dovish FOMC policy meeting.

If the Russians help with the Iranian shortfall, that could be one of their excuses to end participation with the OPEC + production cuts.  Rising US production is also to expected to pickup in a couple of months so any bullish moves may have limited upside.


Gold steadily declined as US stocks continued to track fresh record highs.  Safe-haven demand is falling at fast clip, gold ETF funds on Friday hit a four-month low.  Gold is expected to fall for a third consecutive month and we could see further pressure if we see China continue to show signs of stabilizing.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.