Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Slowing Price Growth a Welcome Reprieve, FOMC Signals More Work Ahead

Headline and core CPI surprised to the downside in November, rising 0.1% and 0.2%, respectively. The FOMC slowed its pace of monetary policy tightening, raising the fed funds rate 50 bps to a range of 4.25%-4.50%. Retail sales flopped and industrial production slipped. All signs point to a bumpy road ahead.
Next week: Housing Starts, Existing & New Home Sales (Tue/Wed/Fri), Leading Economic Index (Wed), Personal Income & Spending (Fri)

International: Here a Hike, There a Hike, Everywhere a Rate Hike

The European Central Bank (ECB) raised its policy rate 50 bps to 2.00% and announced plans to begin quantitative tightening in March. Its accompanying commentary was hawkish in tone, and we now expect the ECB to raise its policy rate to 3.25% through the first half of 2023. The Bank of England raised its policy rate 50 bps to 3.50% and struck a more balanced tone, while the Swiss National Bank hiked rates 50 bps and Norway's central bank hiked rates 25 bps.
Next week: Bank of Japan & Japan CPI (Tue/Thu), Canada GDP & CPI (Wed/Fri)

Interest Rate Watch: Markets Scoff at More Hawkish FOMC Rate Projections

The FOMC may have slowed its pace of tightening, but the committee delivered a hawkish message about how high the fed funds rate may ultimately need to rise and how long it may need to stay elevated. However, markets appear skeptical that the FOMC will deliver, likely due to differing views on inflation.

Topic of the Week: The Trophy (and a GDP Boost) Are on the Line in the 2022 World Cup Final

After 62 matches, the road ends here for the 2022 World Cup. Argentina and France will duel in Doha this Sunday in an enticing final matchup to decide which nation will be crowned world champions for the next four years. A World Cup win would be a welcome distraction, and potential economic benefit, to either country as both Argentina's and France’s economies are looking far less golden than their football squads.

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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 bounces back toward $4,200 as Warsh downs USD

Gold has changed course, bouncing back toward $4,200 in the early European morning on Friday, as the US Dollar weakens following Warsh's comments. Warsh stuck to his commitment to delivering price stability, while noting that he won't pre-judge meetings.

Bitcoin holds $80,500; Ethereum rebounds, Ripple weakens

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) show mixed price action on Friday, with BTC and ETH holding above key support levels while XRP struggles below key resistance. Meanwhile, sticky inflation figures have dampened risk appetite, and momentum indicators for these top three cryptocurrencies have also weakened, signaling a risk of a deeper correction if key support fails to hold.

US midterms put fiscal policy under the spotlight, treasury sell-off raises risk

The US will hold its midterm elections - a de facto referendum on the Trump administration - on 3rd November after two years shaped by rising trade protectionism, attacks on Federal Reserve independence and, since the spring, the Iran war. Republicans are expected to take a heavy electoral hit.

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.