Weekly economic and financial commentary

Wells Fargo Research Team Wells Fargo

Summary

United States: Economic Activity Continues to Fly High

Data on the retail and manufacturing sectors surprised to the upside, while residential construction continued to gather momentum. The FOMC meeting minutes acknowledged the economy's resilience and continued to stress the Committee's resolve to bring inflation back down toward its 2% goal.
Next week: Existing Home Sales (Tue), New Home Sales (Wed), Durable Goods (Thu)

International: Persistent and Resilient: A Few More BoE Hikes Still to Come

Amid still persistent inflation, the latest U.K. GDP report confirmed a respectable performance from the British economy during the first half of the year. This week, we also received more insight into just how weak China's economy is; activity data, such as retail sales and industrial production, were underwhelming.
Next week: United Kingdom PMIs (Wed), Eurozone PMIs (Wed), Central Bank of Turkey (Thu)

Interest Rate Watch: A Higher Nominal and Real 10-Year Treasury Yield

The yield on the 10-year U.S. Treasury climbed to a 15-year high this week. With market expectations of inflation little changed, the move has sparked a tightening in financial conditions not entirely unwelcome by the Fed.

Credit Market Insights: Mortgage Rates Reach Highest Level in over 20 Years

The housing sector has acutely felt the effect of the Federal Reserve’s policy tightening. This week, Freddie Mac’s 30-year fixed-rate mortgage rose to 7.09%, its highest level in over 20 years.

Topic of the Week: England vs. Spain: The Lionesses’ Share of Inflation

This coming Sunday, England and Spain will face off in the Women’s World Cup Final in Sydney, Australia. Outside of football, however, the two countries are facing different challenges in battling soaring inflation.

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Wells Fargo Research Team

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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.