Weekly economic commentary: Inflation's bumpy descent continues

Wells Fargo Research Team Wells Fargo

United States: Inflation's bumpy descent continues

A slate of price data left the overall inflation picture little changed this week. Consumer prices came in a touch hotter than expected and producer prices came in a touch cooler, but on trend inflation continues to grind lower. With recent progress slower going and upside risks to inflation remaining, the latest FOM

Next week: Retail Sales (Thu.), Industrial Production (Thu.), Housing Starts (Fri.)

International: Mix of economic data from advanced and emerging economies

It was a moderately busy week for international economic data releases. In Japan, wage growth data were generally encouraging, and U.K. monthly GDP figures point to an economy that is continuing to recover. Elsewhere, the Reserve Bank of New Zealand's dovish 50 bps rate cut has led us to forecast more aggressive central bank easing going forward. China's stimulus announcements have disappointed so far, although another announcement is expected this weekend, while inflation slowed by more than expected in Mexico but picked up slightly in Brazil.

Next week: U.K. CPI (Wed.), European Central Bank (Thu.), China GDP (Fri.)

Credit market insights: Consumer credit moderates as interest expenses mount

Consumer reliance on credit moderated in August, as demonstrated by data released this week by the Federal Reserve Board. Overall consumer credit outstanding grew $8.9 billion to a total outstanding balance of $5.1 trillion. The moderation from July’s swift pace of growth of $26.6 billion was primarily driven by a drop in revolving balances, a category largely composed of credit cards.

Topic of the week: How will economic data reflect Hurricane Helene and Milton?

The 2024 hurricane season has devastated many areas in the Southeastern United States. It is too early to get a precise read on the full suite of damages and loss of life caused by Helene and Milton. Yet, we know from times past that severe hurricanes can meaningfully distort economic data.

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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.