Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Don't Look Down Yet

Consumer price inflation may have peaked, but the climb down from here will not be free of obstacles. The CPI and PPI rose 0.3% and 0.5%, respectively, in April. Small business optimism stalled during the month, as owners are concerned about their ability to continue to pass on higher costs to consumers.
Next week: Retail Sales (Tues), Industrial Production (Tues), Housing Starts (Wed)

International: Inflation Plague Continues in Emerging Markets

Price growth is a global problem; however, inflation seems to be more of a problem across the emerging markets. With commodity prices still high and weak local currencies, most emerging market countries are experiencing above-target inflation.
Next week: UK CPI (Wed), Japan CPI (Thurs), South Africa Reserve Bank (Fri)

Interest Rate Watch: Will Tighter Financial Conditions Lead to a More Dovish Fed?

In the post-FOMC meeting press conference last week, Chair Powell indicated that financial conditions would need to tighten to help the Fed restore price stability. The Bloomberg Financial Conditions Index began to tighten early this year when FOMC members signaled that the committee would become more aggressive in battling inflation. This week, conditions tightened further to the least-supportive posture in two years.

Credit Market Insights: Consumer Credit Overdelivers for a Second Month

Consumer credit grew by a record $52.4B in March as it more than doubled consensus estimates for the second month running. The surge was relatively well-balanced, with revolving credit—mostly linked to credit card spending—rising $31.4B, while nonrevolving credit climbed a slightly lower $21.4B.

Topic of the Week: Fertilizer Crunch Threatens to Drive Food Prices Higher

Rising food prices continued to sting consumers in April as grocery prices and prices for food away from home rose 1.0% and 0.6%, respectively. A global supply shortage of chemical fertilizers may put further pressure on already strained food commodity markets.

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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.