Weekly Economic & Financial Commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: The Calm Before the Storm

This week brought glimpses of market stabilization after weeks of turmoil. Although consumers seem unfazed by the uproar, tighter credit conditions coming down the pipeline will likely weigh on growth. Meanwhile, inflation continues to advance at a stubbornly high pace, adding to the case for a 25 bps hike in May.
Next week: ISM PMIs (Mon & Wed), Trade Balance (Wed), Nonfarm Payrolls (Fri)

International: Sticky Eurozone Core Inflation

The Eurozone is a perfect example of how inflation can be "sticky" coming down. While headline CPI inflation has receded from its peak, core inflation, which strips out volatile components like food and energy, has continued to push higher and remains stubbornly elevated.
Next week: Japan Tankan Survey (Mon), RBA Rate Decision (Tue), RBNZ Rate Decision (Wed)

Credit Market Insights: Survey Says... Declining Demand for Consumer Credit

Recently released data from the New York Fed's credit access survey support the premise that consumers are finding it increasingly difficult to draw on credit. Consumer demand for credit declined 4.8% between October 2022 and February 2023, the third-largest decline reported in the tri-annual survey data going back to 2013.

Topic of the Week: Pandemic Population Shifts Slowed Down in 2022

One significant change brought on by the pandemic was a rapid decline in net domestic migration for many large counties in the United States. According to new data published this week by the Census Bureau, outmigration from those counties slowed down in 2022. A sharp rebound in international migration was another noteworthy change.

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Wells Fargo Research Team

Wells Fargo

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold retakes $4,100 as weak US bond yields and USD support ahead of US NFP

Gold attracts dip-buyers during the Asian session on Friday, stalling the previous day’s pullback from a two-week high. The recent fall in US bond yields undermines the US Dollar amid hopes for Iran diplomacy, supporting the bullion. However, a higher-rate environment warrants caution for XAU/USD bulls as focus remains on the crucial US NFP report.

Ethereum falls 7% as AI sell-off hits crypto

Ethereum falls 7% to $2,230 on Thursday as AI stock sell-offs spilled into the crypto market. The top altcoin's decline wiped out all of Wednesday's post-US midterm gains, triggering $181.8 million in ETH liquidations over the past 24 hours. Long liquidations dominated, totaling $149.7 million, according to Coinglass data.

Neither the election nor the US Dollar: Why Friday's payrolls hold the key to Gold's next move

Gold has climbed back above $4,000 as the US Dollar weakened following a Democratic sweep in the US midterm elections. However, with every Gold rally facing heavy selling throughout the year, investors are looking to Friday's Nonfarm Payrolls report to determine whether this move marks a sustainable breakout or just another temporary rebound.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.