The earnings momentum of US companies for the first quarter of the year is exceptional. Reported profits are up 26% year-on-year, driving significant upward revisions to 2026 growth forecasts. While the majority of sectors are benefiting from this trend, it is technology companies that are the primary contributors to earnings growth. The surge in profitability among companies active in the field of Artificial Intelligence is accompanied by a marked increase in capital expenditure dedicated to the development of this technology. Amazon, Meta, Alphabet and Microsoft alone are set to allocate close to USD 750 billion to the advancement of AI in 2026, double the amount of last year. These colossal sums will primarily benefit semiconductor companies, the indispensable suppliers of chips and memory for data centres. The SOX semiconductor index has consequently surged 66% from its March lows, a sharp rally that warrants near-term caution, even as we remain constructive on the AI theme.
The recent trajectory of the US dollar confirms a structural fragility that could deepen should a lasting de-escalation of the Middle East conflict materialise. Over recent months, the greenback appears to have been reacting asymmetrically to geopolitical developments: it retreats swiftly whenever diplomatic progress becomes apparent yet fails to rebound meaningfully when tensions re-emerge. This dynamic reflects a gradual shift in the perception of the dollar as an uncontested safe-haven currency.
Traditionally, periods of international uncertainty provided mechanical support to the US currency through safety flows directed towards dollar-denominated assets. However, recent market behaviour suggests that this reflex is fading. Investors now appear more sensitive to the United States' structural imbalances, a sizeable fiscal deficit and elevated levels of public debt, than to short-term geopolitical factors alone.
In this context, a de-escalation in the Middle East could accelerate downward pressure on the dollar by encouraging a rotation towards more cyclical assets and currencies offering superior valuation potential. Notably, with the exception of the Swiss franc, the currencies best positioned to benefit from a further slide in the greenback are unlikely to be the traditional safe-haven alternatives. The Japanese yen, long regarded as a natural substitute for the dollar, continues to inspire reservations among investors. Japanese authorities have indeed been compelled to intervene recently to curb their currency's depreciation, a sign that structural vulnerabilities remain significant despite the gradual monetary policy adjustments undertaken by the Bank of Japan.
Conversely, several currencies on the periphery of the dollar appear better positioned to extend the appreciation they have begun to register over recent months. The Australian and New Zealand dollars are benefiting from a gradual improvement in the Asian cycle and favourable exposure to commodity markets. Within the emerging market universe, the Chinese yuan, the Brazilian real and the Mexican peso also present compelling arguments: attractive interest rate differentials, still-reasonable valuations and relatively resilient economic outlooks.
Should this trend prove durable, the foreign exchange market could enter a more sustained phase of diversification away from the US dollar, with growing investor interest in currencies offering a combination of yield, monetary discipline and exposure to economies at an earlier stage of their debt cycle.
The unemployment rate remained unchanged in the United States in April. Despite geopolitical uncertainties and inflationary fears, the labour market remains resilient. Furthermore, wage growth continues to outpace inflation, pointing to a robust consumer climate.