Sat, Jan 22, 2022 @ 08:15 GMT
HomeContributorsFundamental AnalysisWeekly Economic & Financial Commentary: U.S. Dollar Stumbles to Start the Year

Weekly Economic & Financial Commentary: U.S. Dollar Stumbles to Start the Year

Summary

United States: Not Through with 2021 Just Yet

  • Inflation is intensifying and consumer activity is cooling, data covering the month of December reveal. The Consumer Price Index (CPI) rose 7.0% year-over-year, the fastest increase in nearly 40 years. Similarly, the Producer Price Index (PPI) was up 9.7% over the year. Meanwhile, retail sales unexpectedly declined 1.9% in the final month of the year.
  • Elsewhere, the NFIB Small Business Optimism Index edged up to 98.9. Industrial production slipped 0.1%, as supply constraints held down manufacturing production. Consumer sentiment fell to 68.8 in January, the first solid sign that the Omicron surge is weighing on economic activity.
  • Next week: Housing Starts (Wednesday), Existing Home Sales (Thursday), Leading Index (Friday)

International: U.K. GDP Advances While Australian Retail Sales Surge

  • In the G10, U.K. November GDP rose an encouraging 0.9%, while Australia retail sales rose by 7.3% month-over-month in November, the largest gain since May 2020. In emerging markets, price pressures remain present in Brazil, as December CPI came in higher than expected at 10.06% year-over-year, still well above the Central Bank of Brazil’s 3.5% target for 2022.
  • Next week: China GDP (Monday), U.K. CPI (Wednesday), Japan CPI (Friday)

Interest Rate Watch: When Will the Federal Reserve Shrink Its Balance Sheet, and by How Much?

  • The outlook for U.S. monetary policy has shifted significantly in recent months. With tighter monetary policy on the horizon, market attention has turned to possible reductions in the Fed’s asset holdings, which total nearly $9 trillion at present, up from $4.2 trillion before the pandemic.

Credit Market Insights: Mortgage Rates Are on the Rise

  • According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage jumped almost a quarter of a percent this week, rising to 3.45% from 3.22%—the highest level since the pandemic’s onset in March 2020.

Topic of the Week: U.S. Dollar Stumbles to Start the Year

  • A hawkish shift from the Fed has not been enough to prevent the U.S. dollar from tumbling to start 2022. Following a year where the broad dollar index (DXY) rose close to 6.5%, in the first few weeks of this year the same index has dropped a little over 1%.

Full report here.

Wells Fargo Securitieshttp://www.wellsfargo.com/
Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A, Wells Fargo Advisors, LLC, and Wells Fargo Securities International Limited. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company © 2010 Wells Fargo Securities, LLC.

Featured Analysis

Learn Forex Trading