Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: December Rate Cut, Options Left Open for January

The FOMC lowered the fed funds rate 25 bps at its December meeting and left its options open for January as the Committee weighs incoming data with a wide dispersion of views. Data out this week continue to show the labor market losing steam, supporting the case for returning monetary policy to a neutral stance.
Next week: Employment (Tue.), Retail Sales (Tue.), CPI (Thu.)

International: Global Central Banks Holding Steady

In contrast to the FOMC’s rate cut, most global policymakers played it cool in a jam-packed week of central bank decisions, opting to hold steady. The Bank of Canada, Reserve Bank of Australia, Swiss National Bank and Brazilian Central Bank all kept policy rates unchanged. Meanwhile, outside the rate-setting arena, Mexico’s inflation surprised to the upside.
Next week: China Industrial Production and Retail Sales (Mon.), Bank of England Policy Rate (Thu.), European Central Bank (Thu.)

Topic of the Week: A Cut to Close Out the Year

The December FOMC meeting included the latest Summary of Economic Projections. Despite dissents and a hawkish tilt to the dot plot, the Committee maintains an easing bias.

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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.