Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: April Economic Data Show Resilient U.S. Economy

U.S. retail sales topped expectations in April, while industrial production also grew more rapidly than economists expected. Data on housing starts, home sales and homebuilder sentiment, however, showed tentative signs of cooling.
Next week: New Home Sales (Tue), Durable Goods (Wed), Personal Income & Spending (Fri)

International: U.K. and Canada Inflation Reach New Cycle Highs

U.K. inflation surged to a fresh 40-year high in April, quickening to 9.0% and placing additional pressure on the Bank of England (BoE) to double down and tighten monetary policy. Inflation in Canada also reached a new high, but this time of "only" 30 years; headline CPI inched up to 6.8% year-over-year in April.
Next week: Eurozone PMIs (Tue), U.K. PMIs (Tue), RBNZ Rate Decision (Wed)

Interest Rate Watch: Bond Yields Up Significantly in Many Foreign Economies

The United States is not the only major economy in which long-term interest rates have risen significantly. For example, the yield on the two-year government bond in Germany has risen about 100 bps since the beginning of the year, while the comparable yield in the United Kingdom is up about 80 bps over the same period.

Topic of the Week: The Outlook for Corporate Debt in a Rising Rate Environment

After nearly tripling from just over $4T at the turn of the century to about $12T today, non-financial corporate (NFC) debt is at an all-time high. With recent Federal Reserve rate hikes and likely more to come, we outlined some hypothetical scenarios to analyze future debt serviceability in the NFC sector considering rising rates.

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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.