Inflation continues to gradually drift lower

Wells Fargo Research Team Wells Fargo

Summary

United States: Inflation continues to gradually drift lower

The Consumer Price Index (CPI) rose 0.4% in September, a monthly change that was a bit softer than the 0.6% increase registered in August. The core CPI rose 0.3% during the month, a pace unchanged from the month prior. Overall, the cooling trend in inflation remains in place and price pressures are likely to ease further, in our view. That noted, a 0.5% rise in the Producer Price Index (PPI) shows that continued progress on inflation is likely to be slow.
Next week: Retail Sales (Tue.), Industrial Production (Tue.), Existing Home Sales (Thu.)

International: UK growth remains near a stand still

U.K. GDP rose 0.2% month-over-month in August, only partly offsetting a large July decline, meaning a contraction in overall Q3 GDP cannot be ruled out. Services output rose in August, though consumer facing services activity remained soft, and industrial output declined further. Given the underwhelming economic trends, we still expect the U.K. to fall into recession by Q4 of this year.
Next week: China GDP (Wed.), U.K. CPI (Wed.), Japan CPI (Fri.)

Credit market insights: Where credit is due: Student loans explain fall in consumer credit

Total consumer credit outstanding, which excludes mortgages, fell $15.6 billion in August. The precipitous decline stemmed from a $26.9 billion decrease in consumer installment loans held by the federal government. Notably, this line includes student loans originated and purchased by the U.S. Department of Education.

Topic of the week: Israel-Gaza conflict views and potential implications

Hamas' attack on Israel marks another major geopolitical challenge permeating across the globe. Predicting the evolution of the Israel-Gaza conflict is difficult; however, Prime Minister Netanyahu's declaration of war against Hamas and subsequent rhetoric seem to suggest a speedy de-escalation is not on the horizon.

Download The Full US Economic Outlook

Author

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.