Long holiday weekend clouded by debt ceiling

Wells Fargo Research Team Wells Fargo

Summary

United States: Long holiday weekend clouded by debt ceiling

With a deal on the debt ceiling hanging in the balance, the near-term economic outlook remains uncertain. Data released this week suggest the real economy is showing resilience, as new home sales and durable goods orders stabilized, while real personal spending surprised to the upside.
Next week: Consumer Confidence (Tue), ISM Manufacturing (Wed), Nonfarm Payrolls (Fri)

International: Inflation to force the Bank of England's hand

The U.K. April consumer price index was an unpleasant surprise for Bank of England policymakers. Headline inflation slowed and energy prices receded, albeit by much less than expected. As a result, we now expect the Bank of England to raise its policy rate at both its June 22 and August 3 announcements. We have adjusted up our global growth outlook slightly on the back of improving economic activity, which continues to flow in; however, growth prospects for the global economy this year may be starting to plateau.
Next week: China PMIs (Tuesday), India GDP (Wednesday), Brazil GDP (Thursday)

Interest rate watch: Star gazing once again

As the FOMC tries to determine what level of interest rates will be sufficient to tame inflation, oneguidepost is the natural rate of interest, or r-star. Estimations resumed this month after being temporarily halted due to the volatility surrounding the pandemic, and suggest the era of a low natural rate of interest remains intact.

Topic of the week: Is demography still destiny?

The 2020 Census Demographic and Housing Characteristics (DHC) data were published this week and The population of the United States is not getting any younger. The median age in most states rose between 2010 and 2020 as falling birth rates and domestic migration drove demographic shifts.

Download The Full Economic Indicator

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.