Weekly economic commentary: A matter of conditioning and a matter of fact

Wells Fargo Research Team Wells Fargo

Summary

United States: A matter of conditioning and a matter of fact

This week brought with it a hot print on service-sector prices and a solid job gain for December. When combined with looming tariff-related uncertainly, these developments add more fodder to the case that the Fed will pause interest rate cuts at its upcoming meeting.
Next week: CPI (Wed.), Retail Sales (Thurs.), Housing Starts (Fri.)

International: In with the new: Updated economic data from economies around the globe

A new year has begun, and with it has come a wave of economic data from countries around the world. Eurozone inflation picked up mildly, while Swiss price pressures eased. Developments in Canada made headlines this week, with Prime Minster Justin Trudeau stepping down as leader of the Liberal Party. In Latin America, inflation data from Mexico and Brazil were somewhat mixed.
Next week: U.K. CPI (Wed.), Australian Employment (Thu.), China GDP (Fri.)

Interest rate watch: Cutting rates, but higher yields

When U.S. markets closed on Sept. 17, the 10-year Treasury yield was 3.65%. The next day, the FOMC announced that it was reducing the federal funds rate by 50 bps, the first rate cut by the central bank since 2020. Since then, the FOMC has cut the fed funds rate by an additional 50 bps, but the 10-year Treasury yield is roughly 100 bps higher at 4.65%. What happened?

Credit market insights: Gaps persist in household net worth across wealth spectrum

The Federal Reserve recently released the Q3-2024 Distributional Financial Accounts, providing a more in-depth look at how aggregate gains in household net worth were distributed across the income and wealth spectrum.

Topic of the week: Immigration drove population growth in 2024

The U.S. population expanded by 1.0% in 2024, marking the fastest pace of population growth in more than two decades. As demographics remained unfavorable, immigration drove most of the increase. Domestic movements within the United States also quieted; however, Americans continued to leave expensive coastal areas for more affordable locations across the Sunbelt and Mountain West.

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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.