Weekly economic & financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Lukewarm Jobs Report Keeps March Rate Cut in Play

The December labor data continued to signal a gradual and orderly cooling in the jobs market. We still view that the FOMC will be on hold at its upcoming Jan. 28 meeting and that a couple more rate cuts this year look likely amid the continued moderation in hiring. The Supreme Court did not rule on IEEPA tariffs Friday, but a decision could come as early as next week.
Next week: CPI (Tue.), New Home Sales (Tue.), Retail Sales (Wed.)

International: Cooling Prices Dominate Global Data

Global inflation data this week largely signaled easing, with declines in the Eurozone, Sweden, Australia and Mexico. Switzerland, Norway and China saw modest, likely temporary increases. Meanwhile, Japan’s wage growth came in softer than expected.
Next week: India CPI (Mon.), U.K. Monthly GDP (Thu.)

Topic of the Week: Implications of U.S. Intervention in Venezuela

Events in Venezuela this past weekend are top of mind for market participants, especially those with exposure to Latin America and oil. While the situation is very much riddled with uncertainty, we do not envisage material or long-lasting financial market disruptions on the basis that markets may have been prepared for political turnover in Venezuela.

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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.