Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Household Spending Surges Despite Fastest Inflation in 30+ Years

Inflation is no doubt a headwind, but in October at least, it was not enough to stop consumers from spending, with a real personal spending pickup of 0.7%. With a five-handle on the PCE deflator, inflation is higher now than at any point since 1990. The headline PCE deflator came in at 5.0% year-over-year in October and core PCE was 4.1%.
Seasonal adjustment factors may have played a role in the drop in jobless claims to their lowest level since 1969.
Existing home sales rose to a nine-month high and new home sales are moving faster than they have since the height of the spring selling season in April.
Next week: Construction Spending (Wed), ISM Manufacturing (Wed), Employment (Fri)

International: Unexpected Resilience for Europe's PMI Surveys

November PMI surveys for the Eurozone and the United Kingdom were stronger than expected, while also indicating ongoing supply disruptions in the form of lengthening supplier delivery times, as well as higher costs and prices. For the U.K., the PMIs are likely another reason for the Bank of England to raise interest rates in December. For the Eurozone, worsening future output expectations and a drop in German IFO business confidence hint at a softer PMI in December.
Next week: China PMIs (Tues), Eurozone CPI (Tues), Canada GDP (Tues)

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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.