Market Insights: S&P 500 Gains Momentum, USD/CAD Downtrend Persists Amidst Global Economic Developments | Daily Market Analysis

Key events:

• USA - Durable Goods Orders (MoM) (Mar)
• USA - Crude Oil Inventories

Tuesday saw another positive close for the S&P 500, marking its second consecutive daily increase fueled by generally upbeat quarterly earnings as anticipation builds for the Magnificent 7's financial reports, with Tesla scheduled to unveil its figures after market hours.

The Dow Jones Industrial Average surged by 263 points, or 0.7%, while the S&P 500 climbed by 1.2%, and the NASDAQ Composite soared by 1.6%.

Tesla, the electric vehicle titan (NASDAQ: TSLA), leads the charge for the "Magnificent Seven" with its quarterly earnings announcement post-market.

Despite recent stock declines amid concerns over an industry-wide electric vehicle downturn triggering fierce competition, Tesla aims to redirect attention toward future prospects such as Full Self-Driving (FSD) and the potential for robotaxi services, according to insights from UBS. However, the company's stance on launching a more affordable EV, dubbed the Model 2, remains pivotal for investors.

Joining Tesla, four other members of the illustrious group are poised to reveal their earnings this week. Meta Platforms, the parent company of Facebook (NASDAQ: META), will disclose its financial results on Wednesday, followed by Microsoft Corporation (NASDAQ: MSFT) and Google's parent Alphabet (NASDAQ: GOOGL) on Thursday.

Investors eagerly await these reports to gauge whether the market's premium valuations for these major corporations are justified by their first-quarter performance.

The USD/CAD pair persists in its downward trajectory, which initiated on April 17, hovering around 1.3660 during Wednesday's Asian session. This trend is propelled by a weakened US Dollar, influenced in part by disappointing PMI data from the United States released on Tuesday.

In April, the initial S&P Global Composite PMI for the US dipped to 50.9 from the previous reading of 52.1. Concurrently, the Manufacturing PMI declined to 49.9 from 51.9 in the prior reading, falling below the anticipated 52.0. Likewise, the Services PMI decreased to 50.9, compared to the preceding 51.7, missing the expected 52.0 mark.

Meanwhile, in Canada, the rise in crude oil prices provides upliftment to the Canadian Dollar, given Canada's status as the largest exporter of crude oil to the United States. WTI crude oil trades near $83.20 per barrel at present.

The surge in crude oil prices follows industry data indicating an unexpected drop in US crude stocks last week, suggesting positive demand dynamics and shifting attention away from Middle East tensions. The American Petroleum Institute reported a 3.23 million barrels decline in weekly crude oil stocks for the week ending April 19, contrary to the expected increase of 1.80 million barrels and the previous week's rise of 4.09 million barrels.

Additionally, the Canadian Industrial Product Price Index rose by 0.8% in March, meeting expectations and slightly lower than the upwardly revised figure of 1.1% from the previous month. Furthermore, the New Housing Price Index remained unchanged in March, against forecasts of a 0.1% increase, with the year-over-year NHPI declining by 0.4%. Investors are eagerly awaiting Canadian Retail Sales data scheduled for release on Wednesday.

Elsewhere, the Australian Dollar continues its upward trajectory for the third consecutive day following the release of better-than-expected CPI data on Wednesday. These optimistic inflation figures have the potential to instigate a hawkish sentiment regarding the Reserve Bank of Australia’s monetary policy outlook, thus strengthening the Australian Dollar and supporting the AUD/USD pair.

The AUD's rise parallels the ascent of the ASX 200 Index, particularly driven by the technology and healthcare sectors. Australian stocks reflect the positive momentum witnessed on Wall Street, buoyed by robust corporate earnings reports that have bolstered market sentiment.

Conversely, the Japanese Yen remains subdued against the US Dollar and trades near multi-decade lows during Wednesday's Asian session. The cautious stance of the Bank of Japan toward further policy normalization diverges significantly from expectations that the Federal Reserve may postpone interest rate cuts amidst persistent inflation. This, coupled with a generally upbeat risk tone bolstered by easing geopolitical tensions in the Middle East, continues to undermine the safe-haven appeal of the JPY.

However, JPY bears remain vigilant amid the possibility of Japanese authorities intervening in the markets to support the domestic currency. Traders also exhibit hesitancy ahead of the crucial BoJ decision and significant US macro data, namely the Advance Q1 GDP report and the PCE Price Index.