Weekly economic –United States: Inflation cools as summer begins

Wells Fargo Research Team Wells Fargo

Summary

United States: Inflation cools as summer begins

A bevy of soft inflation data for May fueled optimism that the Federal Reserve will begin cutting rates at the September FOMC meeting. On Wednesday, the May CPI data showed that consumer prices were unchanged in the month, the first flat reading for the CPI since July 2022. Excluding food and energy, core CPI increased by a "low" 0.2% (0.16% before rounding), the smallest monthly increase since August 2021.
Next week: Retail Sales (Tue.), Industrial Production (Tue.), Existing Home Sales (Fri.)

International: Bank of Japan holds steady, but signals further normalization ahead

The Bank of Japan (BoJ) did not announce any new concrete policy measures at its meeting this week, but did signal the likelihood of further policy normalization ahead. The BoJ said the virtuous cycle between wages and prices is continuing to intensify, and that it would decide on a detailed plan for the reduction in the pace of its bond purchases. We also expect the BoJ to eventually hike its policy rate further, but not until the October meeting.
Next week: China Retail Sales & Industrial Output (Mon.), Reserve Bank of Australia (Tue.), Bank of England (Thu.)

Interest rate watch: FOMC maintains its measured approach to easing

There wasn't much surprise that came out of the FOMC's June monetary policy meeting this week. The Committee left rates unchanged, and now expects higher inflation and less easing this year than previously. It remains a close call between one and two 25 bps rate cuts this year.

Topic of the week: Idiosyncratic risks weigh on Latin America's financial markets

This week, Latin American financial markets—particularly currency markets—came under pressure. We can point to the election surprise in Mexico as the originator of regional market volatility; however, additional policy uncertainty in countries such as Brazil and Colombia also contributed to new volatility in local markets.

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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.