Weekly economic commentary: FOMC in no hurry

Wells Fargo Research Team Wells Fargo

Summary

United States: FOMC in no hurry

A hot reading on the CPI to start 2025 amplified worries that progress in getting inflation back to target has stalled out as new risks arrive from changing trade policy. Meanwhile, retail sales unexpectedly plunged in January, suggesting consumers tightened their belts to start the year.
Next week: Housing Starts (Wed.), Existing Home Sales (Fri)

International: Global economic activity and price data are in the air

This week saw the release of economic activity and price data across advanced and emerging economies. In the United Kingdom, fourth quarter GDP growth figures were somewhat underwhelming. In Norway, the economy slowed at the end of last year, and while inflation came in a touch higher than expected, we still look for Norges Bank to initiate its easing cycle in March. The Swiss CPI report was somewhat mixed, and although Brazil inflation eased a touch, it remains elevated, and we look for further Brazilian Central Bank tightening this year.
Next week: Japan GDP (Mon.), Reserve Bank of Australia Policy Rate (Tue.), Eurozone PMIs (Fri.)

Interest rate watch: Mortgage rates likely will remain elevated

We did not make any meaningful changes to the interest rate forecasts we published this week. We believe the 30-year fixed rate mortgage will remain elevated for as far as the eye can see, which will continue to exert headwinds on the housing market.

Topic of the week: The rising tide of employment among Black American community

In commemoration of Black History Month 2025, we focus on recent labor market developments in the Black & African American community. We find that Black & African Americans have made meaningful economic progress over the past five years, resulting in higher labor force participation, employment and earnings.

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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.