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.

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Wells Fargo Research Team

Wells Fargo

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.