European Central Bank delivers large hike, but refrains from future guidance

Wells Fargo Research Team Wells Fargo

United States: Top O' the cycle?

In February, the headline and core CPI rose 0.4% and 0.5%, respectively. The headline PPI fell 0.1%. Retail sales declined 0.4% during February, while industrial production was flat (0.0%). Housing starts and permits jumped 9.8% and 13.8%, respectively. The Leading Economic Index dipped 0.3%. The preliminary University of Michigan Sentiment Index fell to 63.4 in March.
Next week: Existing Home Sales (Tue), New Home Sales (Thu), Durable Goods (Fri)

International: European Central Bank delivers large hike, but refrains from future guidance

In a widely anticipated monetary policy announcement, the European Central Bank (ECB) raised its Deposit Rate 50 bps to 3.00%, saying that inflation is projected to remain far too high. However, in a nod to recent financial market strains, the ECB highlighted elevated uncertainty, emphasized a data-dependent approach to policy rate decisions and refrained from signaling any future rate moves. That said, with inflation elevated we still expect further tightening and forecast a peak policy rate of 3.50% by June this year.
Next week: Swiss National Bank (Thu), Bank of England (Thu), Eurozone PMIs (Fri)

Interest rate watch: FOMC: To hike or not to hike on March 22?

It's a close call, but we expect the recent banking crisis to lead the FOMC to temporarily pause its tightening cycle at its policy meeting on March 22. Assuming the current crisis remains contained, we look for the FOMC to hike rates again starting on May 3.

Topic of the week: The state of the US banking sector

Recent tightening of financial conditions triggered by the collapse of a few U.S. regional banks has led to fears that other institutions may be in a similar position of not being able to meet obligations to depositors due to losses on securities holdings. We believe that authorities will take the necessary steps to prevent another global financial crisis, but there will likely be lasting consequences in the form of tighter financial conditions.

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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.