Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: July Jobs Report Squashes Current Recession Fears

Employers added over half a million jobs in July, which squashes arguments that the U.S. economy is currently in recession. While other measures of labor market strength have shown more pronounced signs of slowing, the July jobs report puts further pressure on the Fed to act aggressively in its fight against inflation.
Next week: Productivity (Tues.), CPI (Wed.)

International: Global Central Banks Deliver Another Round of Rate Hikes

The Bank of England stepped up the pace of its monetary tightening, raising its policy rate 50 bps to 1.75% this week, and also notified it would likely begin active sales of its government bond holdings shortly after its September announcement. The Reserve Bank of Australia (RBA) also hiked rates 50 bps but hinted at a more flexible approach moving forward. We expect the RBA to revert to 25 bps increments from September. Brazil's Central Bank raised its Selic Rate 50 bps this week, and we now expect one final 25 bps hike to 14.00% at its September monetary policy announcement.
Next week: Brazil CPI (Tue.), Mexico Overnight Rate (Thu.), U.K. GDP (Fri.)

Credit Market Insights: Household Debt Surges in the Second Quarter

Total household debt balances rose by $312B in the second quarter of this year, a 2% increase from last quarter. Debt has now surpassed $16T and has increased by over $2T since the start of 2020.

Topic of the Week: Tension in Taiwan

Speaker of the House Nancy Pelosi's visit to Taiwan made one thing clear: U.S.-China tensions are not going anywhere anytime soon and international trade between the two countries continues to hang in the balance.

View the full report here

Author

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.