While risk remains, the worst appears to be behind us

Wells Fargo Research Team Wells Fargo

US Review

While Risk Remains, The Worst Appears to Be Behind Us

The resurgence in COVID-19 in much of the Sun Belt appears to have topped out, although cases are rising faster in some smaller mid-Atlantic states and in parts of Europe, Asia and Australia.
Real GDP declined in line with expectations, plunging at a record 32.9% annual rate.
Jobless claims rose for a second consecutive week, and continuing claims also increased.
Consumer confidence faltered as the second wave of COVID-19 infections triggered a pullback in economic engagement.

Global Review

Q2 GDP Data Shows Impact of COVID-19

As expected, Mexico’s economy contracted significantly in the second quarter. The effects of COVID-19 and collapse in oil prices weighed heavily on the economy in Q2, while a lack of fiscal policy support from the current administration adds challenges to Mexico’s growth outlook going forward.
GDP data were released across Europe as well, with the German economy recording a third straight quarterly contraction. Eurozone GDP performed roughly in line with expectations, recording a large decline in Q2. Despite the large contraction, we are optimistic on the Eurozone economy’s prospects for the second half of the year.

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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.