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.

Download The Full Economic Indicator

Author

Wells Fargo Research Team

Wells Fargo

GBP/USD grinds higher to 1.3650 as USD recovery falters

GBP/USD grinds higher to near 1.3650 in Tuesday's European session. The US Dollar recovery falters, despite US sanctions on Iran, as hopes for diplomatic efforts creep back amid reports that Pakistan is carrying an offer to Iran to halt the siege and lift sanctions under the Memorandum of Understanding.

EUR/USD recovers toward 1.1700 as USD loses traction

EUR/USD is recovering ground toward 1.1700 in European trading on Tuesday. The pair draws support as the US Dollar rebound loses traction amid fresh diplomacy hopes in the Middle East conflict. An upbeat German IFO Survey also aids Euro bulls.

Gold remains depressed below $4,650 on firmer USD, Fed risks, and Middle East tensions

Gold remains on the back foot below $4,650 through the first half of the European session. However, the lack of follow-through selling warrants caution before positioning for an extension of the intraday retracement slide from the $4,700 neighborhood, or the highest level since May 14, touched earlier this Tuesday. The US Dollar is seen building on its recovery from a three-month low as inflation risks stemming from volatile energy prices keep bets for at least one interest rate hike by the US Federal Reserve on the table.

Bitcoin's rally above $80,000 shows signs of overheating

Bitcoin extends gains, trading above $80,000 at the time of writing on Tuesday following its strongest weekly rise in more than three years. Institutional demand continues to support this rally, with spot Exchange Traded Funds recording positive inflows on Monday.

Iran and Fed outlook remain uncertain after Bessent’s comments and ahead of Jackson Hole

Asia Market Update: Directionless trading continues for a 2nd straight session; Iran and Fed outlook remain uncertain after Bessent’s comments and ahead of Jackson Hole; Oman’s Foreign Minister will visit Tehran to Tues, Pakistan commented on MOU.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.