Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Powell Hints at Earlier Taper, but Payroll Miss & Omicron Variant Loom Large

This week was bustling with economic news as tensions mounted surrounding the breakout of the Omicron variant. The changes in tone in Powell's comments during his testimony before Congress have economists and markets on high alert for the December 15 FOMC meeting. Meanwhile, payrolls rose less than half of the consensus estimates, although participation rose and the unemployment rate fell to 4.2%. ISM surveys pointed to strength in manufacturing and services production, while consumer confidence dipped slightly and construction spending moderated.
Next week: Trade Balance (Tues), JOLTS (Wed), CPI (Fri)

International: Eurozone November CPI & Canada Q3 GDP Come in Hot

The Eurozone's November CPI grew at a record pace of 4.9% year-over-year, while Canada's Q3 GDP bounced back, rising 5.4% quarter-over-quarter (annualized). In China, the November manufacturing and services PMIs both came in slightly stronger than expectations, but the outlook remains uncertain amid COVID-related restrictions and a slowdown in the real estate sector.
Next week: Reserve Bank of India (Tues), Brazilian Central Bank (Wed), Bank of Canada (Wed)

Interest Rate Watch: Is the Fed Turning Hawkish?

Federal Reserve Chairman Jerome Powell got the attention of market participants this week, acknowledging that "it now appears that factors pushing inflation upward will linger well into next year." The Fed Chairman also said that the Federal Open Market Committee (FOMC) may consider speeding up the pace of "tapering" of its asset purchases.

Credit Market Insights: A Recovery to Pre-Pandemic Levels in Household Credit

Credit card application rates have now risen to their pre-pandemic levels, indicating that consumers are returning to, or even exceeding, their level of household spending from before the pandemic.

Topic of the Week: Congress Faces a Jam-Packed December Schedule

On Thursday, Congress reached an eleventh-hour agreement on a continuing resolution (CR) that would once again avert a government shutdown for a few months. The CR agreed to this week is just the tip of the iceberg for Congress this December.

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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.