Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: With Eyes on Washington, the Expansion Continues to Roll Along

Data released this week showed the production and housing sectors continued to hum, despite ongoing supply constraints, while consumers kept spending, despite some trepidation about the economic outlook.
Next week: Trade Balance (Tuesday), ISM Services (Tuesday), Nonfarm Payrolls (Friday)

International: Rate Hikes Across Latin America; Mixed Signals from China's PMIs

With elevated inflation still a concern in Latin America, central banks across the region opted to lift interest rates this week in an effort to control price pressures. While we are not exactly calling for a sudden turn in China's economic prospects, the non-manufacturing PMI gives us hope that the end of the recent economic slowdown could be near.
Next week: Turkey CPI (Monday), RBNZ Rate Decision (Tuesday), Reserve Bank of India Rate Decision (Friday)

Interest Rate Watch: Interest Rates Rise in Wake of FOMC Meeting

We look for the yield on the two-year note to rise to 0.90% by the end of next year and to 1.60% by the end of 2023. We also see rates at the longer end of the curve moving higher, albeit not to the same extent as the two-year note.

Credit Market Insights: The iBuyer Phenomenon

The United States' housing market has resiliently rebounded from last year's sharp, COVID-driven contraction. Recently, home flipping has become increasingly popular among companies known as “iBuyers.” These firms finance their activities with bonds backed by homes they have purchased, but have not yet sold, as collateral.

Topic of the Week: Shutdown Avoided, but Debt Limit Looms Large

On Thursday, Congress passed and President Biden signed a continuing resolution (CR) that funds the federal government until Dec. 3. The CR averted a government shutdown that would have begun today if Congress had not acted in time. However, we are not out of the woods yet when it comes to fiscal deadlines in D.C.

Download the full report

Author

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.