Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: The U.S. Economy Continues to Push Through Supply-Side Headwinds

During May, retail sales pulled back 1.3%, while industrial production rose 0.8%. Housing starts improved 3.6% in May, but the NAHB/Wells Fargo Housing Market Index slipped two points to 81 in June. The PPI for final demand advanced 0.8% in May. The FOMC made no major changes to monetary policy.
Next week: Existing Home Sales (Tues.), Durable Goods (Thurs.), Personal Income & Spending (Fri.)

International: China's Economy Shows Signs of a Slowdown; Brazilian Central Bank Lifts Rates Again

This week, Chinese activity indicators revealed the economy is decelerating and the economic outperformance exhibited throughout 2020 may be starting to fade. Also, the Brazilian Central Bank raised policy rates another 75 bps and signaled additional tightening is very likely at its next meeting.
Next week: Eurozone PMIs (Wednesday), Bank of England (Thursday), Central Bank of Mexico (Thursday)

Interest Rate Watch: The "Dot Plot" Shifts Up

The Federal Open Market Committee (FOMC) met on June 15-16, and as widely expected, it made no substantive policy changes. But the meeting was consequential because of the signaling that the committee provided through its "dot plot."

Topic of the Week: U.S. and E.U. End Aircraft Dispute to Form United Front Against China

The 17-year stalemate between the United States and the European Union over aircraft subsidies finally came to an end (at least for now) on Tuesday as both parties decided to suspend related tariffs for the next five years.

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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.