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

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 looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

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.