Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Supply-Side Challenges Continue to Bedevil the Recovery

After coming in below consensus for two months in a row, nonfarm employment surprised to the upside in June, with employers adding 850,000 jobs. The unemployment rate rose to 5.9%.
The ISM manufacturing index fell to 60.6 in June. Manufacturers continue to report a litany of supply-chain challenges: lengthening delivery times, persistent component shortages, staffing difficulties and rising prices. The prices paid series rose 4.1 points to 92.1, its highest reading since 1979.
Consumer confidence and buying plans both rebounded in June, but shortages of automobiles, new and existing homes, household appliances and a whole host of other items continue to weigh on the recovery. Pending home sales surged 8% in May, pointing to an end to the recent slide in existing home sales.
Next week: ISM Services Index (Tuesday), JOLTS Job Openings (Wednesday), FOMC Minutes (Wednesday)

International: Eurozone Economy Looks Forward to Brighter Days Ahead

Firming confidence surveys and rising retail sales point to better days ahead for the Eurozone economy. Canada's GDP declined in April but may be close to bottoming out, while in Japan, the economic recovery looks to be struggling to gain any momentum.
Next week: Australia monetary policy announcement (Tuesday), Brazil CPI (Thursday), U.K. GDP (Friday)

Credit Market Insights: C&I Lending Declines: Not Worth Losing Sleep Over

After experiencing double-digit growth in three out of four quarters in 2020, the year-over-year declines seen in commercial & industrial (C&I) lending in April and May may look disappointing, but there is no reason to worry yet.

Topic of the Week: Fourth of July Means Elevated Spirits...and Prices

This Independence Day marks the first large gathering for many families and friends after more than a year of social distancing. Continuing with the theme of 2021, it will not come cheap.

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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.