Something in the Air

Wells Fargo Research Team Wells Fargo

Weekly Economic & Financial Commentary

U.S. Review

Fears of an escalating coronavirus outbreak reached the United States this week, as a Washington state man became the first confirmed domestic case and the international total reached more than 800.
We expect any short-term economic impact to be limited and concentrated in East Asia, but the U.S. economy is certainly more vulnerable to shocks at this stage in the cycle. Sentiment matters.
On the home front, December existing home sales rose a solid 3.6% to a 5.54 million-unit pace as the housing market renaissance continues.

Global Review

China’s Coronavirus Spreading to Financial Markets

For the last three weeks, a new coronavirus has originated in China and spread across Asia. Most recently, the virus was confirmed to have entered the United States, sparking reminders of the SARS epidemic that plagued China and Asia in the early 2000s.
These fears have reached financial markets, with Asian and Chinese asset prices coming under pressure over the last few weeks. With travel restrictions put in place and the Chinese New Year approaching, Chinese economic activity data could be affected; however, we would expect any disruptions to be short-lived.

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Wells Fargo Research Team

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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.