Weekly economic commentary: Mixed data from foreign economies amid global uncertainties

Wells Fargo Research Team Wells Fargo

Summary

United States: Tariff headwinds meet productivity tailwinds

It was a quiet week on the economic indicator calendar, allowing analysts to continue to digest the array of data released last week that provided unambiguous signs of demand materially slowing. Solid labor productivity remains a bright spot, but slowing activity and broadening price pressures in the service sector point to mild stagflation.
Next week: Consumer Price Index (Tue.), Retail Sales (Fri.), Industrial Production (Fri.)

International: Mixed data from foreign economies amid global uncertainties

This week, central banks across the U.K., India and Mexico made cautious policy decisions. The Bank of England and Banxico cut rates, while the Reserve Bank of India held steady amid currency stability concerns. Switzerland saw a surprise rise in inflation, and Mexico’s core inflation remained sticky despite headline easing. And finally, down under, soft labor market data in New Zealand supports expectations for a rate cut.
Next week: Reserve Bank of Australia Policy Rate (Tue.), Norges Bank Policy Rate (Thu.), China Industrial Production and Retail Sales (Fri.)

Interest Rate Watch: For (Term) Premium Subscribers

In this week's Interest Rate Watch section, we discuss the outlook for the neutral rate and term premiums in the context of the fair value for the 10-year Treasury yield. If we add our estimate of the overnight rate to current estimates of the 10-year term premium, we get a long-run, fair value estimate of the 10-year Treasury yield around 4%, not too far from the current spot rate.

Topic of the week: Duty calls

In a recent escalation of trade policy, the Trump administration announced updated reciprocal tariffs ranging from 10% to 41% on goods from over 60 countries. The overall macroeconomic effect remains uncertain, and while the updated tariffs offer some clarity and stability in the short term, significant uncertainties remain.

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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.