Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Put on Pause

As the federal government shutdown approaches its third full week, no end appears to be in sight. While the economic and financial market impact of the shutdown has been muted so far, it is not costless, and there is not much precedent for such a full shutdown lasting longer than a few weeks.
Next week: Existing Home Sales (Thu.), CPI (Fri.)

International: Soft Signals in a Shifting Landscape

In a relatively light week for international economic data, UK monthly GDP grew modestly, but last month’s figure was revised into contraction, offsetting recent gains. Wage and labor market data painted a mixed picture of the British economy. Australia’s employment report disappointed, while inflation in India fell below the central bank’s target.
Next week: China GDP (Mon.), Canada CPI (Tue.), Eurozone PMIs (Fri.)

Topic of the Week: Tensions Rising in U.S.-China Trade Relations

We unpack the rising tensions brewing in the U.S.-China trade spat this week following export curbs out of China on rare earth minerals and magnets and the U.S. threatening an additional 100% tariff on imports from the country. The 90-day pause on higher reciprocal rates also ends mid-November, though Trump has said these high rates are unsustainable and a fair deal must be met.

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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.