Fed Cleared for December, Now We Look to 2017

Wells Fargo Research Team Wells Fargo

U.S. Review

Fed Cleared for December, Now We Look to 2017

The final employment numbers and ISM surveys of 2016 are on the books, the way is cleared for the FOMC to raise rates next week and the focus turns to 2017. The key theme next year will be risk and reward in an aging business cycle. We presented our annual outlook for 2017 this week, refer to our website for a replay and the accompanying report.
Data released this week mostly contributed to the stronger case for tighter monetary policy going forward. The ISM nonmanufacturing survey jumped, factory orders firmed slightly and JOLTS reiterated a tight labor market.

Global Review

ECB Maintains Accommodative Policy Stance

At its policy meeting this week, the European Central Bank (ECB) dialed back its purchases of bonds from €80 billion/month to €60 billion/month (beginning in April). However, the ECB also extended its purchase program, which was set to expire in March 2017, through next December. Most analysts viewed the news as dovish, on balance.
As long as inflation remains well below the ECB’s target, monetary policy in the Eurozone will remain accommodative. It seems likely that the euro will weaken further vis-à-vis the U.S. dollar next year.

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Wells Fargo Research Team

Wells Fargo

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.