Global inflation continues to decelerate

Wells Fargo Research Team Wells Fargo

Summary

United States: Hot economic data accompanies the heart of summer

The U.S. economic data released this week were almost universally strong. Jobless claims dipped lower, the housing market data continued to surprise to the upside and there were signs of life in business equipment spending.
Next week: Construction Spending (Mon.), ISM Indices (Mon. & Thur.), Employment (Fri.)

International: Global inflation continues to decelerate

This week's data point to an ongoing improvement in global inflation trends, though perhaps not quite as quickly as might ideally be hoped. The Eurozone CPI slowed to 5.5% year-over-year, but core inflation actually ticked higher to 5.4%. Canada's May headline CPI slowed to 3.4% and Australia's May headline CPI slowed to 5.6%, though in both of those countries the slowing in core inflation was less pronounced.
Next week: Japan Tankan Survey (Mon.), RBA Policy Rate (Tue.), Mexico CPI (Fri.)

Interest rate watch: Higher for longer

Recent policy actions and comments by central bank officials have convinced market participants that rates are heading higher and that they will remain elevated for longer than previously thought.

Topic of the week: Immigration flows have fully rebounded after the pandemic

After essentially halting during the pandemic, U.S. immigration levels have rebounded. Immigration flows as a percentage of annual population growth rose above its pre-pandemic 10-year average in 2022, providing a boost to the population and labor force.

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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.