Weekly economic and financial commentary: Will the ECB start to taper?

Wells Fargo Research Team Wells Fargo

Summary

United States: Supplies Attack

Napoleon famously observed that an army marches on its stomach; in a similar vein, an economy can grow only as fast as its supply chains.
Material shortages were evident in the ISM reports, and the May jobs report revealed labor shortages. Employers added 559K jobs, which was short of expectations. The fact that average hourly earnings jumped again points to the fact that employers are paying up to find talent.
Next week: Trade Balance (Tuesday), CPI (Thursday)

International: Emerging Markets Growth Outperforming Early

Q1 GDP prints were mixed this week as Canadian data underwhelmed relative to consensus expectations, while the Brazilian and Indian economies proved to be more resilient despite COVID-related headwinds.
Next week: Brazil Inflation (Wednesday), Mexico Bi-Weekly CPI (Wednesday), Peru Elections (Sunday)

Interest Rate Watch: Will the ECB Start to Taper?

The European Central Bank holds a widely anticipated policy meeting next week. Will the Governing Council announce a "tapering" in the pace of its asset purchases?

Credit Market Insights: So Long, SMCCF

The Federal Reserve announced this week that it plans to wind down its corporate debt portfolio. The Secondary Market Corporate Credit Facility has roughly $14 billion in corporate bonds and corporate bond ETFs, and the unwinding of this portfolio is unlikely to have much direct impact on the broader corporate bond market.

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Wells Fargo Research Team

Wells Fargo

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold adds to Thursday's gains as softer bond yields drag USD to over one-week low

Gold attracts buyers for the second straight day on Friday amid a broadly weaker US Dollar, though it remains confined in a two-week-old range. The USD Index (DXY), which tracks the Greenback against a basket of currencies, fell to a nearly two-week low as Federal Reserve Chair Kevin Warsh’s remarks at the Annual IMF and World Bank Group Meetings did little to alter the rate outlook.

Busy week for Ripple’s RLUSD: What changes for stablecoin holders?

Ripple’s RLUSD is gaining ground across institutional finance, with a major bank launching custody services, a new wallet integration making it easier for developers to build payments and agentic experiences on the network, and a brokerage platform planning to use the stablecoin for settlement.

Hot inflation, falling yields: A new test for global markets

Global markets are confronting a difficult combination: renewed inflation pressure, expensive capital and growing scrutiny of the investment supporting the AI boom. The most revealing development this week was the demand for government bonds even as US inflation accelerated. My assessment is that investors should treat this as a test of financing resilience.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.