United States: Labor costs complicate the tide back to 2% inflation

Wells Fargo Research Team Wells Fargo

United States: Labor costs complicate the ride back to 2% inflation

The U.S. economy expanded at a weaker-than-expected pace in Q1; real GDP grew at a 1.1% annualized rate. The ECI increased a hotter-than-expected 1.2% in Q1, suggesting compensation costs are not cooling as much as the average hourly earnings data indicate.

International: Eurozone avoids recession, Bank of Japan keeps policy unchanged

The Eurozone's Q1 GDP data released this week revealed that the economy narrowly avoided recession at the start of the year. The economy expanded 0.1% quarter-over-quarter in Q1 after contracting 0.1% in Q4-2022. Elsewhere, the Bank of Japan (BoJ) held its April monetary policy meeting this week, the first one under its new governor, Kazuo Ueda. The BoJ decided unanimously to keep policy settings unchanged, and while Governor Ueda's commentary leaned dovish, he did not rule out the possibility of an eventual shift in monetary policy.

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Wells Fargo Research Team

Wells Fargo

GBP/USD extends the drop to 1.3360

GBP/USD builds on Monday’s decline and briefly clinches five-day lows near 1.3360 on Tuesday. Cable’s extra pullback follows the better tone in the Greenback as uncertainty in the Middle East prompts investors to adopt a cautious stance. Meanwhile, an apathetic UK labour market report also collaborates with the selling pressure on the British Pound.

EUR/USD stays offered just above 1.1400

EUR/USD keeps the downtrend well in place for yet another day, challenging the 1.1400 contention zone on Tuesday. The continuation of the selling impulse in spot comes amid decent gains in the US Dollar, which continues to find support in the persistent effervescence surrounding the US-Iran crisis.

Gold hits one-week high, near $4,100 as bulls shrug off Fed hike bets and firmer USD

Gold advances to an over one-week high during the Asian session on Wednesday, with bulls now awaiting a move beyond $4,100 before positioning for additional gains. However, concerns about energy-driven inflation risks continue to fuel Fed rate-hike bets and act as a tailwind for the US Dollar amid escalating US-Iran tensions, which, in turn, could cap the bullion.

XRP rebounds on rising on-chain activity

Ripple (XRP) ticks up and trades around $1.13 at the time of writing on Tuesday. This rebound aligns with a broader recovery in the cryptocurrency market, attributed to reports that mediators between the United States (US) and Iran are seeking a 10-day cessation of strikes to find a way back to the signed Memorandum of Understanding (MoU).

The Iranian war has again risen

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US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.