Pursuing Other Plans that Don’t Involve America – Currency Thoughts

Pursuing Other Plans that Don’t Involve America

July 21, 2025

(182) Much has changed in the world during the first half of Donald Trump’s second non-consecutive term as president of the United States. As the August 1st tariff hike deadline looms closer, several sets of frenzied efforts to reach trade deals with the U.S. continue, but countries on a different level are forging closer ties to prepare for an economic and political geopolitical world not led by America.

Not so long ago, it was unthinkable to think of an international monetary system without U.S. dollar hegemony. The U.S. currency has become so embedded in the infrastructure of trade and financial market transactions that getting to from here to a world where the dollar is but one of several mediums will no doubt present formidable challenges. But such shift now seems plausible in far shorter time than previously was imaginable.

Some countries are doubling down on their democratic and liberal values. Other places have been infected by the the right-wing populism of the MAGA movement that has been so successful politically in the United States. Japan’s election yesterday of half the seats in parliament’s upper chamber left the world’s fourth largest economy without a majority in either chamber for the first time in seven decades, and the right-wing Democratic Party and Sanseito Party were the main beneficiaries, collectively picking up 25 more seats than they had previously.

Global growth prospects softened in the first half of 2025, a paradoxical development when juxtaposed against the substantial reported advances in the development of artificial intelligence. Sharply higher tariffs have not yet been matched by inflation. Price data released today in a variety of economies has accentuated stability.

• Consumer prices in New Zealand rose 0.5% last quarter, down from 0.9% in the first quarter. Their year-on-year 2.7% increase proved to be less than analysts were expecting and down from 3.3% in the second quarter of 2024, 6.0% in 2Q 2023 and the peak of 7.3% in 2Q 2022. The data seemingly point to the next central bank rate cut in New Zealand happening sooner rather than later.
• Consumer price inflation in Hong Kong fell back a half percentage point to 1.4%, marking the sixth 1.4% reading in the last nine months.
• Estonian producer price inflation swung to a 13-month low of -1.5% in June from +0.5% in May and 27-month high of 6.1% this past February.
• Polish PPI inflation, which peaked at 22.5% in May 2022, was also below zero percent at a 6-month low of -1.8% in June
• In the former Soviet Republic of Georgia, producer price inflation of 3.0% in June after 4.9% in May and 7.9% last December represented the sixth month of deceleration in a row.
• Icelandic PPI inflation of -1.5% last month after +0.3% in May had touched a 29-month high of 9.5% as recently as February.
• Latvian PPI inflation slowed in June for a fourth straight time to a reading of -0.5% versus +0.2% in May and 3.7% in February.
• PPI inflation in Slovenia climbed to a 22-month high in June but only 1.3% and well down from a peak of 22.5% in May 2022.
• The British Rightmove house price index was a mere 0.1% above its year-earlier level in June, its smallest rise in 17 months.

The dollar opened this fresh week with a small overnight loss of 0.3% against sterling and the won, 0.2% versus the peso, and 0.1% relative to the euro, Swissy, kiwi, and Australian dollar. More remarkable changes occurred in ten-year sovereign debt yields, which are down six basis points in Italy and France, five bps in Spain and Germany, and four basis points in the United States and U.K.

Asian stock markets closed up 1.2% in Indonesia and 0.7% higher in China, Hong Kong and South Korea but down 0.2% in Japan. Australian share prices lost 1.0%, and European markets are somewhat lower. U.S. stock futures point to a slightly higher open, as quarterly corporate earnings have displayed resilience. Fed Governor Waller’s repetitive defense of the case for resumed rate cuts, although presumably a minority view on the FOMC, have solidified expectations that some rate reduction will happen before end-2025.

The People’s Bank of China again held its ground on the 1-year Loan Prime Rate of 3.0% and the 5-year LPR of 3.5%. Their last change, a drop of 10 basis points each, was done three months ago. The government has undertaken a number of fiscal and regulatory moves to support the 5% GDP growth target for this year.

The European Central Bank is not expected to change its interest rate at this Thursday’s review.

The price of Bitcoin strengthened 1.1% so far today. Oil and gold are respectively unchanged and 0.4% higher.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Japanese election results, New Zealand CPI, Peoples Bank of China

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on Monday, July 21st, 2025 at 4:48 am and is filed under New Overnight Developments Abroad – Daily Update.
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