Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: U.S. Economy Still Resilient, but Headwinds Building

It was a relatively light week on the U.S. economic data front. A slate of housing data offered additional evidence that high mortgage rates and limited inventory are weighing on housing market activity. Jobless claims remained low, but a still-declining LEI and a further climb in Treasury yields and oil prices suggest economic growth will slow in the months ahead.
Next week: New Home Sales (Tue.), Durable Goods (Wed.), Personal Income and Spending (Fri.)

International: Central Banks Here, There and Everywhere

It was a particularly active week for international central banks across the G10 and emerging markets, with several institutions delivering differing decisions and differing messages. Emerging market central banks saw a combination of rate hikes, rate holds and rate cuts. G10 central banks saw some rate hikes and some rate holds, with differing messages also on the likelihood of further monetary tightening in the months ahead.
Next week: Mexico Policy Rate Decision (Thu.), Eurozone CPI (Fri.), China PMIs (Sat.)

Interest Rate Watch: Higher for Longer

The Federal Open Market Committee (FOMC) held the target range for the federal funds rate at 5.25%-5.50% this week. While rates were left unchanged, the Committee retained a hawkish bias. The median projection for the midpoint of the target range at the end of 2024 rose to 5.125%, up from 4.625% in June.

Topic of the Week: Oil Prices Complicate the Fed's Efforts to Reduce Inflation

The climb in oil prices to a 10-month high has created a new challenge to corralling inflation. While having a bigger effect on headline inflation, the increase, if sustained, could also pass through to core prices and slow progress in returning inflation to 2%.

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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.