Weekly economic commentary: Economics is like a box of chocolates

Wells Fargo Research Team Wells Fargo

Summary

United States: Steady hiring, wilting confidence and a yawning trade gap

There was plenty of employment data to digest this week, and broadly speaking, there is not yet hard data to support the notion that the labor market is rolling over, though it's clearly losing momentum. Meanwhile, a pre-tariff spending spree partly explains why March consumer spending was also better than expected.

Next week: ISM Services (Mon.), Trade Balance (Tue.), FOMC (Wed.)

International: Economics is like a box of chocolates

Sometimes economics is like a box of chocolates, and this week's international news is very much a mixed bag. The Bank of Japan held rates steady but highlighted trade concerns, and we have pushed back our expected rate hike to the October meeting. In Canada, PM Carney's Liberal Party won this week's election but fell short of an outright majority. On the data front, China's April PMIs surprised to the downside, while in the Eurozone, GDP growth and inflation data were slightly firmer than expected.

Next week: Brazil Selic Rate (Wed.), Riksbank Policy Rate (Thu.), Bank of England Policy Rate (Thu.)

Credit market insights: Vibe check: How resilient is the US financial system?

The Federal Reserve Board recently published its biannual Financial Stability Report, which provides an assessment of the U.S. financial system. The report—which reflects market conditions and data as of April 11—reviews vulnerabilities and near-term risks related to valuation pressures, borrowing by businesses and households, financial-sector leverage and funding risks.

Topic of the week: Automakers receive some tariff relief

This week, the White House issued an update to the administration’s 25% tariff policy on foreign-made auto imports, stating that the new 25% auto tariffs would not stack on top of other existing tariffs. Beyond the relief to domestic-based purchasers of U.S.-made autos, this provides some additional relief to foreign purchasers of these autos as well.

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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.