The Dollar and Where It Stands

  • The U.S. dollar is seeing one of its strongest years in the last two decades as it is up more than 10% in 2022 compared to other currencies.
  • US travelers spending dollars overseas could be the only party rejoicing over the shift in purchasing power.
  • A shortage of dollars in Sri Lanka contributed to the worst economic crisis in the country's history, ultimately forcing its president out of office last month.
  • In July, Pakistan’s rupee hit a record low against the dollar, resulting in a near-default situation.
  • Egypt is also facing challenging environments due to depleted dollar reserves.

Our thoughts: As it seems to eat other currencies, the dollar’s strength creates fiscal strain in countries where it is not as easy to borrow in the local currency. This leads to hindering the growth of businesses and overall economies.

About Inflation…

  • The latest Consumer Price Index report reveals the rate of increase for prices that American consumers pay for goods and services is slowing down.
  • The CPI index rose 8.5% in July compared to a year ago, which fell short of analysts’ expectations of 8.7%.
  • On a monthly basis, however, the consumer price index was flat as energy prices broadly declined 4.6% and gasoline fell 7.7%, according to the Bureau of Labor Statistics.
  • Workers saw a 0.5% monthly increase in real wages.
  • Inflation levels still remain at their highest levels since the early 1980’s.

Our thoughts: The latest report regarding inflation was met positively by U.S. markets and could potentially take some pressure off of the Federal Reserve at their next meeting. For a while, the Fed stated they are ready to deliver a 75 basis point hike if they need to; a rate hike of that magnitude may no longer be necessary. While there are positive signs, inflation is still high.

New EU Crypto Regulations to Fight AML

  • The European Union is looking to create a brand new regulator to directly oversee cryptocurrencies
  • The proposal needs to be approved by three different legislative bodies within the EU
  • Termed “Anti-Money Laundering Authority,” there’s a regulatory body that will focus on monitoring “high-risk” cryptocurrency companies
  • Revolut, a digital bank with over 20 million customers, has received approval to service an additional 17 million users across the European Economic Area (EEA)
  • The company already services millions of customers in the U.K, even though its application through the U.K. Financial Conduct Authority (FCA) has yet to be resolved

Our thoughts: Several European governing bodies are pushing for new regulation for the cryptocurrency industry in an inevitable crackdown on money laundering. While unavoidable, one of the productive results of new legislation may be increased transparency in the financial data made available to the public, such as information about beneficial ownership of corporations.