Weekly economic commentary: Election results don't clarify the outlook

Wells Fargo Research Team Wells Fargo

Summary

United States: Election results don't clarify the outlook

Even as the 2024 presidential election has come and gone, there is still a tremendous amount of uncertainty regarding the trajectory of the economy and Fed policy. Tariffs and a tax policy look to be on the docket in the next administration, which could come with higher inflation and thereby higher rates.
Next week: NFIB Small Business Optimism Index (Tue.), CPI (Wed.), Retail Sales (Fri.)

International: Global and thematic implications of the US election

In our view, Trump winning the White House and having a largely unilateral ability to implement tariffs and shift U.S. trade policy in a more protectionist direction is yet another deglobalization force. New trade barriers would have the potential to weigh on the interconnectedness of the global economy, which could have longer-term negative implications for global economic growth. We also view the election results as supportive of further U.S. dollar strength in the medium term.
Next week: India CPI (Tue.), Central Bank of Mexico (Thu.), China Retail Sales & Industrial Production (Fri.)

Interest rate watch: Higher rates likely under Trump administration

President-elect Trump’s victory sparked upward movements in equities and bond yields across the curve. This week’s Fed meeting was less eventful. As was widely expected, the FOMC reduced the federal funds target range by 25 bps to 4.50%-4.75%. Although Chair Powell declined to comment on the election, our expectation for the path of Fed easing has evolved. As we see it today, the potential for higher inflation next year raises the likelihood that the federal funds rate bottoms out closer to 4% than 3%.

Topic of the week: The 2024 US elections: Economic implications

Election Day has come and gone. Donald Trump was elected the 47th president of the United States, becoming the second person to serve two non-consecutive terms as president. We walk through our preliminary thoughts on the recent election results and their implications for the U.S. economy.

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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.

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XRP rally extends as modest ETF inflows support recovery

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