Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Growing Pains: Extended Lead Times, Supply Chain Constraints, Difficulty Finding Labor

The unmistakable message delivered in this week's data is that the U.S. economy could be growing even faster were it not for limited access to essential raw materials and labor.
The April jobs report was a massive disappointment. Employers added just 266,000 workers, not even in the same ZIP code as the one-million job surge that was expected. Finding and retaining workers is a massive problem. Another is that manufacturers forced to idle plants for lack of materials have to furlough workers.
The reopening of the service sector was a bright spot as the leisure & hospitality sector added 331,000 new jobs.
Next week: CPI (Wednesday), Retail Sales (Friday), Industrial Production (Friday)

International: Bank of England Less Easy

The Bank of England (BoE) scaled back the pace of asset purchases at its meeting this week and also signaled that the economy may be recovering quicker than expected. In our view, it is likely BoE asset purchases get further tapered in the near future.
Next week: U.K. GDP (Wednesday), India CPI (Wednesday), Central Bank of Mexico (Thursday)

Credit Market Insights: Loan Demand Remains Tepid in Q1

This week, the Federal Reserve released the Q1 results from its Senior Loan Officer Opinion Survey. Broadly speaking, the results showed that demand for bank loans remains relatively tepid across most lending categories.

Topic of the Week: What's Driving the Sharp Rise in Lumber Prices?

The knock-on effects of the pandemic have constrained the lumber supply at a time when demand has soared. Lumber futures contracts for May are up around 60% since a month ago and 374% over the year.

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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.