Dollar and Euro reach parity ($1:€1) for the first time in 20 years; Japan new heavyweight champion on the Henley & Partners Passport Index; Middle-class Saffas continue to get mortgages approved; Soon-to-be new UK Tory leader to potentially slash taxes and rates in one cut?
USD: Fed promises to deliver on "soft-landing" approach albeit with fastest rising interest rates.
US home sales continue to decline for a fifth consecutive month, and currently is at the lowest its been in two years. New U.S. home building figures and new Payrolls figure releases are big economic indicators of the US economy, and both haven't indicated much of an increase or sustenance of living standards. Permits for new constructions are also declining, which possibly indicates an economic recession to inevitably occur even sooner than their first world counterparts in the Eurozone, Japan, Australia and the UK.
The US Fed's approach is squeeze everyone in the short-term in order to realise a pleasant long-term economic growth. US Mutual funds and equities, in particular ClearBridge Sustainability Leaders FI with a 5-year return of 13.52% (ticker symbol: LCSTX) continue to be top performers. Some states are even contemplating investing in certain crypto like stablecoins and Central Bank Digital Currencies (CBDCs) in order to hedge against ever increasing rates and prevent the corrosive effects such increases have on their pensions and savings.
ZAR: SARB steep hike in repurchase rate led to a resultant increase in prime rate of 9%, but middle-class Saffas still purchasing new homes
Even as uncertainty continues to hang over the South African economy, there are signs of increased cashflow as many middle-class residents continue to get mortgages approved. The South African economy in Q1 2022 grew by 1.9%, almost double what SA economists had predicted. However enhanced measures to reduce electricity consumption and an increasingly hostile international relations due to the side South Africa falls on the Russia-Ukraine war (South Africa is a key member of BRICS), could lead to economic shortfalls in GDP and income, but that's a variable that can go either way.
EUR: ECB raises benchmark deposit rate for the first time in 11 years by 50 bps.
Madame Largade's ECB Monetary Policy Committee raised the benchmark deposit rate by 50 basis points to 0%, which is against their own rule of nothing more than 25 basis points at a time. The new bond repurchase scheme has a bullish outlook to really stop excessive rises in borrowing costs for governments across the Schengen economic zone.
Europe-domiciled funds struggled with June outflows of approx. €47.7 billion due to investor fears of weakening Euro. European Fixed Income funds battled the most, such as bond funds, that saw €84 billion of divested funds over the first half of 2022. European Money Market funds in shrinking comparison only shed away €8 billion over the last half year, possibly due to the investor confidence that still remains relatively high in European Portfolio Managers.
GBP: BoE under fire, but with cheerful prospects of new Tory leader to bring economic change.
With a bet against former Chancellor of the Exchequer Rishi Sunak to be the new PM, the Bank of England is expected to raise rates for a sixth time since December 2021. According to trusted data from Refinitiv, there is a high likelihood (86% probability) of a 50 basis point hike in August.
The pound sterling continues to lose its purchasing parity, and a deep British economic recession is to naturally follow suit. Hopes of the cost-of-living squeeze being untightened exist from the might political campaigns of both Liz Truss and Rishi Sunak, who are promising to cut tax and rates on Day 1 of being the new UK Prime Minister.
JPY: Japan new world heavyweight champion on Henley & Partners Passport Index, and cream this off with maintaining low interest rate policy
Bank of Japan's deputy chief Masayoshi Amamiya expects strong wage increases next year, and he may well be right, as inflation continues to be held at ultra-low levels. Wages haven't increased in Japan over the last 25 years however, as businesses in Japan have very low input costs and pursuant to this, workers don't push for more than the prescribed national minimum wage of approx. ¥156,173,3 per month (€1,280.7/R21,733,81 as of 31/07.2022, at 1912hrs).
Japan now officially has the world's strongest passport according to the Henley & Partners Passport Index, with 193 countries that a Japanese passport holder can travel to visa-free. Two of the best performing Japanese Exchange-Traded Funds currently are WisdomTree Japan Hedged Equity Fund (DXJ) with an 11.4% return over the past year, and iShares Currency Hedged MSCI Japan ETF (HEWJ) with a more conservative 4.1% return over the past year.
AUS: RBA to follow suit like other Central Banks in raising rates to combat sharp unemployment drops in Aussie.
Reserve Bank of Australia Governor Phillip Lowe spoke on how raising interest rates to a minimum "neutral" level of 2.5% from the current 1.35%, would curtail the inflation headwind which is currently at a 20-year peak of 5.1%. Aussie PM Anthony Albanese rules against banning fossil fuel projects, as lower coal exports may lead to high unemployment figures.
"For inflation to return to the 2%–3% target range, a more sustainable balance between demand and supply is needed. Higher interest rates will help achieve this," Lowe said.
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