Weekly economic commentary: Sentiment is cratering

Wells Fargo Research Team Wells Fargo

Summary

United States: Sentiment is cratering but hard data signal only a stalling

The 90-day pause with China cheered financial markets, but economic data showed early indications of the economic impact of tariffs. Retail sales held up OK and industrial production was flat, but small business confidence optimism faded. Consumer sentiment plunged to the second lowest on record amid inflation worries.
Next week: Existing Home Sales (Thu.), New Home Sales (Fri.)

International: Foreign economies start 2025 on surprisingly solid note

This week brought a wave of economic data from both advanced and emerging economies, with several upside surprises on the growth front. The United Kingdom, Norway and Switzerland all posted stronger-than-expected first quarter growth figures, reflecting pockets of resilience despite broader global uncertainty. Japan was the notable outlier, with GDP contracting more than expected. On the emerging economy side, India’s softer-than-expected inflation print was reassuring. Meanwhile, Mexico's central bank lowered its policy rate by 50 bps to 8.50% and signaled further easing to come.
Next week: China Industrial Production and Retail Sales (Mon.), Reserve Bank of Australia Policy Rate (Tue.), Eurozone PMIs (Thu.)

Credit market insights: Here to collect: Student loan delinquencies surge in Q1

The Federal Reserve Bank of New York released an update to its Quarterly Report on Household Debt and Credit this week, which included data through Q1-2025. Rising delinquencies point to some modest strain among consumers, and the resumption of student loan payments after almost five years of forbearance comes as the consumer is on somewhat shakier footing.

Topic of the week: Commercial real estate on stable ground before Liberation Day

The CRE market started 2025 on a positive note. During Q1-2025, transaction volumes, property prices and lending activity all improved against a backdrop of slightly lower capital costs. On balance, vacancy rates across the major property types were lower or ticked only modestly higher, suggesting that the CRE market is on the way to finding balance after several challenging years.

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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.