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 stays defensive below 1.1900 as USD recovers

EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.

GBP/USD holds above 1.3600 after UK data dump

\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.

Gold sticks to modest intraday losses as reduced March Fed rate cut bets underpin USD

Gold languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.

Cardano eyes short-term rebound as derivatives sentiment improves

Cardano (ADA) is trading at $0.257 at the time of writing on Thursday, after slipping more than 4% so far this week. Derivatives sentiment improves as ADA’s funding rates turn positive alongside rising long bets among traders.

A tale of two labour markets: Headline strength masks underlying weakness

Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.

Sonic Labs’ vertical integration fuels recovery in S token

Sonic, previously Fantom (FTM), is extending its recovery trade at $0.048 at the time of writing, after rebounding by over 12% the previous day. The recovery thesis’ strengths lie in the optimism surrounding Sonic Labs’ Wednesday announcement to shift to a vertically integrated model, aimed at boosting S token utility.