Weekly economic commentary: China is now on pace to miss its annual growth target

Wells Fargo Research Team Wells Fargo

Summary

United States: A string of upside surprises, but growth is slowing in the US

Retail sales, housing starts and industrial production all surprised to the upside this week. Yet, an uptick in initial jobless claims was a reminder that conditions in the labor market are cooling, which sets the U.S. economy on a path of slower growth in the second half of the year.
Next week: Existing & New Home Sales (Tues. and Wed.), GDP (Thurs.), Personal Income and Spending (Fri.)

International: China is now on pace to miss its annual growth target

This week, GDP data downshifted and pricing pressures subdued in China, reflecting sluggish activity; against this backdrop, we continue to expect that the People's Bank of China (PBoC) will ease monetary policy during the rest of 2024 and throughout 2025.
Next week: Central Bank of Turkey Policy Rate (Tues.), Bank of Canada Policy Rate (Wed.), Eurozone PMIs (Wed.)

Interest rate watch: Treasury yields: Along for the ride

Through the first half of the year, the incoming data have whipsawed economists, and financial markets have come along for the ride. The see-sawing in Treasury yields over the first half of the year has been all the more notable as the policy rate has remained unchanged; the repricing has been primarily driven by expectations for future policy adjustments.

Topic of the week: Fear not, the consumer is downshifting

Retail sales data released this week surprised to the upside. Coming on the heels of last week's news that revolving consumer credit shot up in the latest monthly data, one might reasonably wonder if the consumer is showing fresh resilience. We provide some context to demonstrate that is not, in fact, the case.

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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.