Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: COVID Rise Jitters Financial Markets, while Housing Perks Up

July's NAHB Housing Market Index slipped one point to 80. Housing starts beat expectations and rose 6.3% during June, although building permits fell 5.1%. Existing home sales climbed 1.4%. The Leading Economic Index (LEI) advanced 0.7% in June. Initial jobless claims rose to 419K for the week ended July 17.
Next week: Durable Goods Orders (Tuesday), Q2 Real GDP (Thursday), Personal Income & Spending (Friday)

International: ECB's Easing Measures Going Nowhere Fast

The European Central Bank made it clear at its monetary policy meeting this week that its main policy rates are unlikely to increase for the next few years amid a shift in its thinking about its inflation target. Eurozone PMI data for July were generally encouraging, but rising COVID cases present a downside risk.
Next week: Canada CPI (Wednesday), Eurozone GDP (Friday)

Interest Rate Watch: Faster Growth and Inflation, Tapering Ahead, but Lower Rates?

When the 10-year Treasury yield peaked in late March, markets were pricing a fed funds rate of roughly 2.25% for that one-year period five years out, not too far from the FOMC's "long-run" dot of 2.50%. Fast-forward to today and market pricing has tumbled to less than 1.50% for roughly the same period.

Credit Market Insights: Will Canada’s Housing Market Sustain Its Frothiness?

Around the world, house prices have been soaring, and Canada's housing market has emerged as one of the frothiest. While the Canadian economy is on track for a strong year in 2021, the lack of affordability and easing lending standards have raised some concerns.

Topic of the Week: Housing Is Moving Back into Balance

While declining affordability and supply shortages have pressured housing activity in recent months, we believe the housing market is now beginning to come back into balance.

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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.