Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: The Rate Outlook Just Got Cloudier

Data remain relatively scarce on day 31 of the government shutdown. Consumer perceptions of the labor market are very weak, and home sales appear to have stalled. The FOMC instituted another 25 bps rate cut, but Powell raised the bar for future easing.
Next week: ISM Manufacturing (Mon.), ISM Services (Wed.), Consumer Credit (Fri.)

International: G10 Central Banks Navigate a Foggy Outlook

This week’s monetary policy decisions came from several key G10 central banks. The Bank of Canada lowered its policy rate to 2.25%, while both the European Central Bank and the Bank of Japan held rates steady. Elsewhere, China’s October PMI surveys came in weaker than expected.
Next week: Reserve Bank of Australia Policy Rate (Tue.), Bank of England Policy Rate (Thu.), Banxico Policy Rate (Thu.)

Interest Rate Watch: Another Risk-Management Cut, but December Looms Large

The FOMC lowered the fed funds target range by 25 bps to 3.75%-4.00% at the conclusion of its October meeting. Yet, Chair Powell made clear that additional easing in December is far from assured.

Topic of the Week: Government Shutdown Disrupting Welfare Programs

The government shutdown is now approaching its fifth week. As funding for certain parts of the government has begun to run dry, welfare programs are soon to be affected.

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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.