Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: U.S. Economy Pushing Through Omicron and Inflation Headwinds

Retail sales jumped 3.8% in January, well above expectations. Industrial production strengthened 1.4% during the first month of the year. Housing activity remained robust in January—while housing starts fell 4.1%, building permits edged up 0.7% and existing home sales jumped 6.7%. Meanwhile, January's Leading Economic Index declined 0.3% and the Producer Price Index leaped 1.0%.
Next week: New Home Sales (Thurs), Personal Income & Spending (Fri), Durable Goods (Fri)

International: Japanese Growth Rebounds as Economy Reopens

Japan's GDP rebounded in the final quarter of 2021, with activity recovering after the state of emergency that was in place for Tokyo and surrounding areas was lifted. Q4 GDP grew at a 5.4% quarter-over-quarter annualized rate, with consumer spending especially strong. However, there are signs the economy has started on a soft note in 2022, and with inflation benign, the Bank of Japan's easy monetary policy looks set to remain in place for some time.
Next week: Eurozone PMIs (Mon), U.K. PMIs (Mon), RBNZ Rate Decision (Wed)

Interest Rate Watch: Minutes and Fed Speak Tamp Down Prospect of 50-bp Hike in March

Minutes from the FOMC's January meeting released this week signaled a rate hike is imminent but did not indicate that officials were itching to lift the fed funds rate by an unusually large 50 bps. With Fed speakers this week seemingly less enthusiastic about the prospect of a 50 bps hike, market expectations for such a move have fallen back below 50%.

Topic of the Week: Russia-Ukraine Conflict Not a Global Economic Risk

Tensions tied to the Russia-Ukraine situation have intensified in recent days. Although we do not have any particular insight into conditions on the ground or wish to speculate on the mindset of leaders involved, assessing the potential economic and financial market reaction to an escalation is still a valuable exercise.

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Wells Fargo Research Team

Wells Fargo

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold extends gains nearing $4,200 as US Dollar struggles

Gold heads north for the second consecutive day, trading near $4,180, with bulls aiming for the $4,230 area, the top of October’s trading range. Precious metals have been boosted by lower US Treasury yields and dovish comments from Federal Reserve officials this week, which have undermined speculative support for the Greenback.

Busy week for Ripple’s RLUSD: What changes for stablecoin holders?

Ripple’s RLUSD is gaining ground across institutional finance, with a major bank launching custody services, a new wallet integration making it easier for developers to build payments and agentic experiences on the network, and a brokerage platform planning to use the stablecoin for settlement.

Hot inflation, falling yields: A new test for global markets

Global markets are confronting a difficult combination: renewed inflation pressure, expensive capital and growing scrutiny of the investment supporting the AI boom. The most revealing development this week was the demand for government bonds even as US inflation accelerated. My assessment is that investors should treat this as a test of financing resilience.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.