Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Service Sector Continues to Support Growth

During August, the ISM Services Index bested consensus expectations and rose to 54.5, hitting the highest reading since February. The monthly upturn highlights ongoing strength in the service sector and overall resilience of U.S. economic growth despite higher interest rates. An uptick in the prices paid component of ISM services index as well as this week's leg-up in oil prices are reminders of the obstacles ahead to fully tamp down inflation.
Next week: CPI (Wed), Retail Sales (Thu), Industrial Production (Fri)

International: China's Economic Free Fall Continues

This week, new data revealed China's economic slowdown is still in effect and a bottom has yet to be reached. China's August Caixin PMI indices showed a more robust deceleration in the services sector than expected. Service sector problems reflect Chinese households' unwillingness to spend and a preference to save, which not even the lifting of Zero-COVID policies has been able to alter.
Next week: Brazil CPI (Tue), Argentina CPI (Thu), ECB Decision (Thu)

Interest Rate Watch: If the Fed Is Done, How Long Will We Be on Hold?

Comments this week from N.Y. Fed President Williams suggested monetary policy is in a "good place" and Chicago Fed President Goolsbee said the Fed was "rapidly approaching the time when our argument is not going to be about how high should the rates go." These remarks are tacitly signaling the end of the tightening cycle. If that is indeed the case, we explore how the length of time the Fed stays on hold could be consequential.

Credit Market Insights: Fed's Beige Book Reveals Continued Uncertainty on the Outlook

This week, the Federal Reserve released its September Beige Book, covering economic conditions across the country for the months of July and August. For the most part, economic growth was steady and generally unchanged from the previous period.

Topic of the Week: US Open Highlights Consumers' Hunger for Experiences

Tennis fans have been converging on Queens, New York to catch the U.S. Open. Resale prices for tickets are higher than ever, but consumers appear more willing to pay up to witness this event.

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Wells Fargo Research Team

Wells Fargo

AUD/USD consolidates above 0.7200 as bulls await US CPI for Fed rate cues

AUD/USD is seen extending its consolidative price action above 0.7200 during the Asian session on Wednesday as traders await the release of US inflation figures later in the week. Meanwhile, rising RBA rate-hike bets act as a tailwind for the Aussie amid Yen-inspired US Dollar weakness. However, escalating US-Iran tensions and hawkish Fed expectations limit USD losses, capping the currency pair.

USD/JPY hangs near multi-month low, above 153.00 amid BoJ hike bets

USD/JPY attracts fresh sellers during the Asian session on Wednesday as the strong Reuters Tankan business survey adds to the case for continued BoJ policy normalisation and boosts the Japanese Yen. This, along with a broadly weaker US Dollar, keeps spot prices close to a nearly seven-month low set on Tuesday. However, geopolitical risks and Fed rate hike bets could support the USD and the currency pair ahead of the release of US inflation figures later this week.

Gold weakens below $4,350, hitting a one-week low on hawkish Fed bets

Gold trades with a negative bias for the fourth straight day and drops to a one-week low, below $4,350 during the Asian session on Wednesday. Expectations of a Fed rate hike this month weigh on the non-yielding bullion. The US Dollar, however, struggles to lure buyers amid a rallying Yen and could support the commodity as traders await the key US inflation data for a fresh impetus.

Bitcoin remains highly sensitive to macro signals amid changing derivatives narrative

Bitcoin’s (BTC) sensitivity to US economic data has become increasingly evident this year. As the market approaches several important data dumps this week, BTC traders are keenly aware of the significance just like their counterparts in TradFi. And just like the stock market, crypto traders are focused squarely on the US central bank's interest rate policy.

Gold and stocks: What eight midterm elections did

I went back through every midterm election since 1994 and asked one question of each: when did the stock market make its low for the year, before the vote or after it? In seven of the eight cycles, the low came before the election. In six of the eight, it came between mid-June and mid-October, which is to say in the exact window that the "they won't let it fall" argument says is protected.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.