Weekly Economic & Financial Commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Jobs Day Fireworks to Start 2023

During January, payrolls jumped by 517K, the unemployment rate fell to 3.4% and average hourly earnings rose by 0.3%. The FOMC raised the fed funds target range by 25 bps to 4.5%-4.75% this week. The ISM services index rebounded to 55.2 in January, while the ISM manufacturing index fell to 47.4. The Employment Cost Index (ECI) rose 1.0% in Q4. In December, job openings (JOLTS) jumped to 11.0 million, while construction outlays fell 0.4%.
Next week: Trade Balance (Tue), Consumer Credit (Tue)

International: Europe's Central Banks Continue Along Rate Hike Paths

The European Central Bank (ECB) delivered a 50 bps increase in its Deposit Rate at this week's monetary policy announcement, and offered a relatively determined message to continue along its monetary tightening path. The ECB pre-committed to another 50 bps increase in March, a somewhat unusual move, and said it would keep interest rates at restrictive levels for some time. The Bank of England (BoE) also raised its policy rate 50 bps at its meeting and delivered relatively balanced commentary. We expect a final 25 bps rate increase at the BoE's March meeting, bringing the policy rate to a peak of 4.25%.
Next week: RBA Rate Decision (Tue), Riksbank Rate Decision (Thu), U.K. GDP (Fri)

Interest Rate Watch: FOMC's Job Not Yet Done

The FOMC elected to raise the federal funds rate by 25 bps to a range of 4.50%-4.75% at the conclusion of its monetary policy meeting on Wednesday. The clear message was that the job is not yet done in getting inflation back down to 2% and further tightening lies ahead, but just how much remains uncertain.

Topic of the Week: Gaining Economic & Financial Ground in the Black Community Since COVID

Wednesday marked the first day of Black History Month 2023. To coincide with this celebration, we produced a report that analyzes the economic and financial shifts experienced by the Black and African American Community relative to pre-pandemic times. Has the Black and African American community gained or lost economic and financial ground over the past three years?

View 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.