US DOLLAR FUNDAMENTAL OUTLOOK: BEARISH

• Strong corporate earnings could punish the haven-linked US Dollar
• Delays in fiscal stimulus may trigger risk aversion, catapult havens
• US GDP data for Q3 may be strong, but Q4 will face a tougher time

Q3 CORPORATE EARNINGS

Third-quarter corporate earnings data from technology, industrial, energy and pharmaceutical giants will be closely scrutinized by investors. Some big names include Facebook, Apple, Alphabet, Twitter, Pfizer, Gilead, Chevron, Exxon Mobil, Petrobras, Royal Dutch Shell, Credit Suisse, Visa, Deutsche Bank, GE, Airbus, Boeing, Ford, Caterpillar and many more.

Last week, Tesla (TSLA) significantly overpassed earnings expectations and saw the jumpy stock rise as much as five percent in one day. Military Goliath Lockheed Martin stock fell on soft guidance for 2021 despite also beating earnings. Mixed earnings did not help the S&P 500, which ended the week in negative territory as ongoing US fiscal stimulus talks rattles sentiment and undermines risk appetite.

It is possible this same dynamic may be replayed in the week ahead, potentially setting the equity index up – along with other indices – for another week of losses. The US Dollar may rise at the expense of these growth-anchored benchmarks, though if progress is made on fiscal talks on top of strong earnings data, this dynamic may reverse.

US GDP DATA

Flash US GDP is on deck and is expected to show a quarter-on-quarter figure of 32.0% on an annualized basis following the -31.4% contraction in the preceding period. The strong bounce back was likely the result of strong fiscal and monetary stimulus, the effects of which may not be felt as strong in Q4 readings. An even more robust figure could punish USD if it buttresses risk appetite, but stormy winds blow on the horizon (UDN).

US GDP DATA SURVEYS ARE IMPRESSIVE – BUT THERE’S A CATCH

Source: Bloomberg

COVID-19 CASES THREATEN TO DERAIL FRAGILE RECOVERY

Another caveat of Q3’s strong growth had to do with the gradual easing of lockdown measures that allowed a degree of economic stabilization. However, now with COVID-19 cases around the world spiking again, the specter of reimposed lockdown measures is haunting investors. The premonitions of slower growth, compounded by political volatility from the election may cushion USD’s decline if it triggers a flight to havens.