Rebound continues, but initial claims and cases rise

Wells Fargo Research Team Wells Fargo

Weekly Economic & Financial Commentary

U.S. Review

Data continue to reflect an economy digging itself out of the lockdown-induced slump.
Consumer prices and retail sales rose in September as activity continued to pick up, but a rise in initial claims for state unemployment benefits last week points to continued churn in the labor market.
Stimulus talks regarding an additional fiscal relief package continued this week, but an agreement remained elusive.
COVID-19 case counts are on the rise in the Midwest, presenting renewed concern of localized setbacks.

Global Review

Data Underwhelming This Week

Swedish inflation slid more than expected in September, with headline and core CPIF remaining well-below the Riksbank’s 2% target inflation rate.
Australia’s employment declined by 29,500 in September, the first decline since May, while the unemployment rate edged higher to 6.9%. The slump in the labor market in part reflects the Stage 4 restrictions in Victoria put in place to contain the spread of COVID-19.
Chile’s central bank held its policy interest rate at 0.50% at this week’s meeting, and did not announce any new quantitative easing measures.

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Wells Fargo Research Team

Wells Fargo

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

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: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

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.