US inflation concerns retreat in July - Raiz Invest


George Lucas, Raiz Group CEO

I thought we would begin with some good news. In the US, there were developments on the inflation front, which some consider as positive, with a July inflation expectation report — it looks at where people see prices rising in the future — falling to 2.8% over a five-year horizon, down from 3.1% in June and a one-year low.

The report is a positive signal given fears inflation could cause higher than anticipated US Federal Reserve rate hikes.  This fear of rate hikes has been a main driver of the current market rout. Hence, news that inflation expectations are falling was welcomed by the market.

Also upbeat were US retail sales numbers. They beat market expectations, rising by 1% for the month of June and giving hope that the US consumer is still spending. The figures suggest the US economy remains strong enough to survive the current rate hikes from the US Federal Reserve.

While the focus of investors may have shifted from high inflation to slowing growth since mid-June,  the retail sales release suggests the US consumer is not slowing down.

In fact, the data was in line with the US jobs report released over a week ago, which showed no signs of slowing employment. It is hard to imagine a full-blown recession when so many people have a job. Still, anything is possible

In Australia, a similar trend is evident, with the jobless rate falling from 3.9% to 3.5% in June.


Price of gold dips to multi-month low

After remaining at a high level for much of the pandemic and surging around the time of Russia’s invasion of Ukraine, gold prices have fallen by more than 15% from an early-March peak.

Part of the fall may be due to the sharp US dollar rise. A rise in the US dollar, all else being equal, boosts the price of gold in terms of other currencies, curbing demand from non-US based investors.


Euro falls below parity with US dollar

Other big news was the fall of the Euro below parity with the US dollar for the first time in almost 20 years, with the currency hit by increasing recession fears in the eurozone. Putting it in context, the euro has fallen nearly 20% since its peak in June 2021, and around 5% in the past three weeks alone.

One of many factors driving the euro lower is interest rate differentials. The interest rate difference between the eurozone and the US.  This difference has continued to widen as the prospects for economic growth, and therefore tighter monetary policy, in the US and Europe have diverged.

There’s also ongoing concerns about Europe’s energy supply and the rapid deterioration of the region’s terms of trade, which have put significant downward pressure on the Euro.

This view is supported by the latest fall in the EUR/USD rate, from 1.06 at the end of June to 1.00, which started when the price of natural gas in Europe surged again. Notably, there are growing concerns that some parts of Europe will be forced to ration gas in the winter.

So looking ahead, it is more likely that the eurozone, as opposed to the US, will head into recession.


China reports sluggish GDP data

In China, data released last week claims that economic growth in Q2 was slightly higher than a year ago. GDP in the Asian superpower expanded by just 0.4% in the three months to June, compared with the same period last year, according to the country’s equivalent of the National Bureau of Statistics (NBS).

The weak GDP report has increased speculation that the policy makers will release hundreds of billions of dollars of stimulus into the Chinese economy in a bid to boost activity.



Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

Click to download the Raiz app


Important Information

If you have read all or any part of our email, website, or communication then you need to know that this is factual information and general advice only. This means it does not consider any person’s particular financial objectives, financial situation, or financial needs. If you are an investor, you should consult a licensed adviser before acting on any information to fully understand the benefits and risk associated with the product. This is your call but that is what you should do.

You may be surprised to learn that RAIZ Invest Australia Limited (ABN 26 604 402 815) (Raiz), an authorised representative AFSL 434776 prepared this information.

We are not allowed, and have not prepared this information to offer financial product advice or a recommendation in relation to any investments or securities. If we did give you personal advice, which we did not, then the use of the Raiz App would be a lot more expensive than the current pricing – sorry but true. You therefore should not rely on this information to make investment decisions, because it was not about you for once, and unfortunately, we cannot advise you on who or what you can rely on – again sorry.

A Product Disclosure Statement (PDS) for Raiz Invest and/or Raiz Invest Super is available on the Raiz Invest website and App. A person must read and consider the PDS before deciding whether, or not, to acquire and/or continue to hold interests in the financial product. We know and ASIC research shows that you probably won’t, but we want you to, and we encourage you to read the PDS so you know exactly what the product does, its risks and costs. If you don’t read the PDS, it’s a bit like flying blind. Probably not a good idea.

The risks and fees for investing are fully set out in the PDS and include the risks that would ordinarily apply to investing. You should note, as illustrated by the global financial crisis of 2008, that sometimes  not even professionals in the financial services sector understand the ordinary risks of investing – because by their nature many risks are unknown – but you still need to give it a go and try to understand the risks set out in the PDS.

Any returns shown or implied are not forecasts and are not reliable guides or predictors of future performance. Those of you who cannot afford financial advice may be considering ignoring this statement, but please don’t, it is so true.

Under no circumstance is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

This information may be based on assumptions or market conditions which change without notice and have not been independently verified. Basically, this says nothing stays the same for long in financial markets (or even in life for that matter) and we are sorry. We try, but we can’t promise that the information is accurate, or stays accurate.

Any opinions or information expressed are subject to change without notice; that’s just the way we roll.

The bundll and superbundll products are provided by FlexiCards Australia Pty Ltd ABN 31 099 651 877 Australian credit licence number 247415. Bundll, snooze and superbundll are trademarks of Flexirent Capital Pty Ltd, a subsidiary of FlexiGroup Limited. Lots of names, which basically you aren’t allowed to reproduce without their permission and we need to include here.

Mastercard is a registered trademark and the circles design is a trademark of Mastercard International Incorporated.

Home loans are subject to approval from the lending institution and Raiz Home Ownership makes no warranties as to the success of an application until all relevant information has been provided.

Raiz Home Ownership Pty Ltd (ABN 14 645 876 937), an Australian Credit Representative number 528594 under Australian Credit Licence number 387025. Raiz Home Ownership Pty Ltd is 100% owned by Raiz Invest Australia Limited (ABN 26 604 402 815).