Finance

The Federal Reserve raised interest rates aggressively starting in March 2022 to tame high inflation.
That underpinned historic strength in the U.S. dollar versus many major global currencies like the euro and Japanese yen. American tourists enjoyed greater buying power abroad.
The Fed expects to cut rates once in 2024 and four more times in 2025. That could weaken the dollar.

SeongJoon Cho/Bloomberg via Getty Images

The U.S. Federal Reserve may start cutting interest rates before year’s end. That could make future trips abroad more expensive for the nation’s travelers.
That’s due to how interest-rate policy affects the strength of the U.S. dollar.

Here’s the basic idea: An environment of rising U.S. interest rates relative to those in other nations is generally “dollar positive,” said Jonathan Petersen, senior markets economist and foreign exchange specialist at Capital Economics.
In other words, rising rates underpin a stronger U.S. dollar versus foreign currencies. Americans can buy more stuff with their money overseas.
The opposite dynamic — falling interest rates — tends to be “dollar negative,” Petersen said. A weaker dollar means Americans can buy less abroad.

Fed officials in June signaled they expect to cut rates once in 2024 and four additional times in 2025.
“Our expectation for now is the dollar will come under more pressure next year,” Petersen said.

However, that’s not necessarily a foregone conclusion. Some financial experts think the dollar’s strength may have staying power.
“There have been quite a few headlines calling for the U.S. dollar’s demise,” Richard Madigan, chief investment officer at J.P. Morgan Private Bank, wrote in a recent note. “I continue to believe the dollar remains the one-eyed man in the land of the blind.”

Why the U.S. dollar gives a ‘discount’ overseas

The Fed started raising interest rates aggressively in March 2022 to tame high pandemic-era inflation. By July 2023, the central bank had raised rates to their highest level in 23 years.
The dollar’s strength surged against that backdrop.
The Nominal Broad U.S. Dollar Index is higher than at any pre-pandemic point dating to at least 2006, when the central bank started tracking such data. The index gauges the dollar’s appreciation relative to currencies of the nation’s main trading partners such as the euro, the Canadian dollar and the Japanese yen.
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For example, in July 2022, the U.S. dollar reached parity with the euro for the first time in 20 years, meaning they had a 1:1 exchange rate. (The euro has since rebounded a bit.)
In early July, the U.S. dollar hit its strongest level against the yen in 38 years.
A strong U.S. dollar gives “a discount on everything you’re purchasing while you’re abroad,” Petersen said.
“In a sense, it’s never been cheaper to go to Japan,” he added.

A record number of Americans visited Japan in April, according to the Asian nation’s tourism board. Benjamin Atwater, a communications specialist at InsideAsia Tours, a travel agency, attributes that partly to the financial incentive bestowed by a strong dollar.
In fact, he personally recently extended a work trip to Japan by a week and a half — instead of opting to travel elsewhere in Asia — largely because of the favorable exchange rate.
Everything from meals, hotels, souvenirs and the rental car were a “great value,” said Atwater, who lives in Denver and has long wanted to travel to Japan.
“It was always portrayed as one of the most expensive places you can go, [but] I was getting some of best steaks I’ve ever had for like $12,” he said.

How interest rates impact the U.S. dollar

In reality, the dynamics driving dollar fluctuations are more complex than whether the Fed raises or lowers interest rates.
The differential in U.S. rates versus other nations is what’s significant, economists said. Fed policy doesn’t exist in a vacuum: Other central banks are also simultaneously making interest-rate choices.
The European Central Bank cut interest rates in June, for example. Meanwhile, the Fed has kept rates higher for longer than many forecasters anticipated — meaning the rate differential between the U.S. and Europe has widened, helping support the dollar.
“The Fed’s on hold, other central banks are getting ready to ease and the Bank of Japan (BoJ) seems stuck in a moment,” J.P. Morgan’s Madigan wrote.

U.S. Federal Reserve Chair Jerome Powell speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing on July 9, 2024. 
Bonnie Cash | Getty Images News | Getty Images

“If Japan wants the yen to stabilize, policy rates need to move higher,” he added. “That doesn’t appear to be happening anytime soon. With the ECB expected to cut ahead of the Fed, I expect current euro weakness to also prevail.”
This is happening against the backdrop of a relatively strong U.S. economy, which also generally supports a strong dollar, Petersen said. At a high level, a strong economy means there will generally be higher economic growth and/or inflation, which means a greater likelihood the Fed will keep interest rates relatively high, he said.
A strong economy also typically incentivizes foreigners to park more money in the U.S., he said.
For example, investors generally get a better return on cash when interest rates are high. If an investor in Europe or Asia were getting perhaps 1% or 2% on bank account holdings while such holdings in the U.S. were yielding 5%, that investor might shift some money to the U.S., Petersen said.

Or, an investor might want more to hold more of their portfolio in U.S. rather than European stocks if the economic growth outlook wasn’t good in Europe, he said.
In such cases, foreigners buy dollar-denominated financial assets. They’d sell their local currency and buy the dollar, a process that ultimately bids up the dollar’s strength, Petersen said.
Exchange rates “all come down to capital flows,” he said.
While these dynamics also hold true in emerging markets, currency fluctuations can be more volatile than in developed nations due to factors like political shocks and risks to commodity prices like those of oil, he added.

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Bill Gross’ Janus Henderson Global Unconstrained Bond Fund suffered more than $200 million in redemptions last month, lowering assets to $1.25 billion from over $2.24 billion in February.
Lucy Nicholson | Reuters

Longtime investor Bill Gross believes Elon Musk’s Tesla is behaving like a speculative play among retail investors.
“Tesla acting like a meme stock — sagging fundamentals, straight up price action,” the former chief investment officer and co-founder of Pimco said in a post on X Tuesday afternoon. “But then there seems to be a new meme stock every other day now. Most are pump and dump.”

Tesla is on a stunning 10-day winning streak, up a whopping 43.6% since June 24. The rally was initially triggered by Tesla’s second-quarter vehicle production and deliveries numbers that beat analyst expectations.

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Tesla’s run

Gross, who at one time was the most influential investor in the U.S. bond market, seems to think that the strong delivery report wasn’t enough to justify such an eye-popping run.
The 80-year-old investor also compared Tesla to Chewy, Zapp, and the “old favorite” GameStop. Chewy recently gained meme status after online personality Roaring Kitty, who inspired 2021’s GameStop mania, bought a sizable stake in the pet retailer.
Gross revealed previously that he dabbled in trading GameStop and AMC options for quick profits in 2022, calling those “lottery-ticket stocks.”
Shares of Tesla are still up just about 6%, lagging the S&P 500, which has gained 17%. More

China’s consumer prices rose by 0.2% in June from a year ago, missing expectations for a 0.4% increase, according to a Reuters poll.
Core CPI, which strips out more volatile food and energy prices, rose by 0.6% year-on-year in June.
China’s producer price index fell by 0.8% year-on-year in June, in-line with forecasts.

Consumers are shopping at a supermarket in Qingzhou, China, on June 12, 2024. 
Nurphoto | Nurphoto | Getty Images

BEIJING — China’s consumer price inflation rose by 0.2% in June from a year ago, missing expectations, while producer prices fell in-line with forecasts, data from the National Bureau of Statistics on Wednesday showed.
China’s consumer price index was expected to rise by 0.4% year-on-year in June, according to a poll by Reuters.

The producer price index, which measures factory-gate prices, dropped by 0.8% from a year ago — in line with expectations.
Core CPI, which strips out more volatile food and energy prices, rose by 0.6% year-on-year in June, slightly slower than the 0.7% increase for the first six months of the year.

The risk of deflation has not faded in China. Domestic demand remains weak.

Zhiwei Zhang
chief economist, Pinpoint Asset Management

Pork prices surged by 18.1% in June from a year ago, while beef prices fell by 13.4%. Tourism prices rose by 3.7% year-on-year in June, down by 0.8% from May.
“The risk of deflation has not faded in China. Domestic demand remains weak,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.

He added that China would rely on exports to support growth in the first half of the year.

The country is scheduled to release trade data for June on Friday.
Lackluster domestic demand in China has kept inflation low, in contrast to major economies such as the U.S. where prices have remained elevated. More

In May 27 members of the Community Empowerment Resource Network (CERNET), a Philippine charity, were charged with bankrolling communist rebels. Straight away the case looked strange. A social-media post by police claimed they had jailed Estrella Flores-Catarata, one of CERNET’s associates, who received an award from the UN for her work with indigenous people last year. She has no criminal record and was set free after paying bail. Other charities that support small-scale farmers and help people after natural disasters have also had their top brass charged and accounts frozen for allegedly breaching the Philippines’ Anti-Terrorism Act, a draconian law passed in 2020. More

Leading nonalcoholic brewer Athletic Brewing Company raised an additional $50 million in equity financing in a round led by General Atlantic. 
The brewer plans to use the latest investment to increase production capacity and expand its offerings at global retailers to meet rising consumer demand for nonalcoholic beer.
Athletic holds over 19% market share within nonalcoholic beer and is driving 32% of total nonalcoholic beer category growth, according to NielsenIQ data.

Company founder Bill Shufelt (left) and head brewer John Walker pause at the Athletic Brewing’s nonalcoholic brewery and production plant on March 20, 2019 in Stratford, Connecticut.
Spencer Platt | Getty Images

Leading nonalcoholic brewer Athletic Brewing Company announced Tuesday it’s raised an additional $50 million in equity financing in a round led by General Atlantic. 
The company expects General Atlantic to “ultimately invest significantly beyond that,” Athletic CEO and founder Bill Shufelt told CNBC’s “Squawk Box” Tuesday morning. The brewer plans to use the latest investment to increase production capacity and expand its offerings at global retailers to meet rising consumer demand for nonalcoholic beer.

“We are passionate about transforming the way modern adults drink and converting critics into believers. We’re at the start of a long-term trend, and we couldn’t be more excited to have General Atlantic by our side as Athletic begins its next phase of growth,” the company said in a press release.

Athletic Brewing launched its nonalcoholic craft brewing facilities in 2018 and has since grown to become the 10th largest U.S. craft brewery and 20th largest overall U.S. brewing company, despite only offering nonalcoholic options, according to rankings by the Brewers Association. 
Athletic holds over 19% market share within nonalcoholic beer and is driving 32% of total nonalcoholic beer category growth, according to NielsenIQ data.
“Revenue has more than doubled since our Series D [funding round] about 18 months ago,” Shufelt said on CNBC.
The Wall Street Journal reported Tuesday the company’s valuation has also doubled with the latest fundraising and now stands at $800 million.

The company currently has two brewing facilities in the U.S., one in Milford, Connecticut, and the second in San Diego. Athletic recently announced the purchase of a third U.S. brewing facility, also located in San Diego. Once operational, Athletic expects the facility to help double its U.S. brewing capacity.
“We sold well over 3 million cases, over a 100 million cans, did over $90 million in revenue last year as a company, and we are growing well above that this year,” Shufelt said.
The company’s success is largely attributed to growing health and wellness trends that are driving consumer interest in nonalcoholic beverages.
More than 40% of Americans say they are actively trying to drink less alcohol in 2024, according to recent data by NCSolutions. That percentage jumps to 49% when surveying millennials and 61% for Generation Z, according to the data.
Established beer companies like Heineken, Constellation Brands-owned Corona, Anheuser-Busch’s Budweiser and even Diageo’s Guinness have also hopped on the trend, introducing nonalcoholic beer offerings of their own.
“We want to give people beer they can drink seven nights a week and feel good about,” Shufelt said. “We’ve invested over $100 million in our manufacturing which has really differentiated quality that this segment has never seen before.”

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There’s a 40% chance President Joe Biden will not seek reelection, according to Stifel Washington strategist Brian Gardner.
If Biden stays in the race, Gardner contends the Democratic Party may still see a favorable outcome.
This is a “make or break week” for the president’s campaign as Congress returns from its Fourth of July recess, Gardner said.

There’s a 40% chance President Joe Biden will not seek reelection, according to Stifel.
Brian Gardner, the firm’s chief Washington policy strategist, is out with a research note that calls it a “make or break week” for the president’s campaign as Congress returns from its Fourth of July recess.

“There’s a 60% chance, more likely than not, that he’s going to stay in,” Gardner told CNBC’s “Fast Money” on Monday. “Biden loves to prove the smart kids in the Democratic Party wrong. So, the more he hears voices from the elites that he needs to get out, the more he digs in his heels.”

Arrows pointing outwards

Gardner, who advises equity analysts on how White House policy could affect their coverage areas, thinks Democrats who are urging Biden to drop out face a considerable obstacle.
“They lack leverage. They can try to persuade Mr. Biden to drop out of the race, but they cannot force him out,” Gardner told clients on Monday. “It is a fantasy to think that at least half of Mr. Biden’s most dedicated supporters will turn on him and not vote to nominate him.”
While concerns about the president’s age have persisted throughout his latest bid for the Oval Office, a poor debate performance in June has changed the tenor of the conversation. Polling data and financial markets are starting to reflect a shift in sentiment that favors former President Donald Trump.
If Biden stays in the race, however, Gardner contends the Democratic Party may still see a favorable outcome.

“There’s a certain level of voter that is just never going to vote for Donald Trump no matter what,” Gardner said.

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Job scams are an emerging threat. They surged 118% in 2023 from 2022, according to the Identity Theft Resource Center.
Scammers may pose as recruiters or post fake job ads in order to get sensitive personal and financial information from job seekers.
Improvements in artificial intelligence and the rise of remote work are big contributors to the growth in employment scams, experts said.

Ridvan_celik | E+ | Getty Images

Employment scams surged last year, as criminals leveraged artificial intelligence to steal money and personal information from unsuspecting job seekers, experts said.
Consumer reports of job scams jumped 118% in 2023 from the prior year, according to a recent report by the Identity Theft Resource Center.

Thieves generally pose as recruiters and post fake job listings to entice applicants, then steal valuable information during the “interview” process.
Often, they put these phony listings on reputable websites like LinkedIn and other job search platforms, ITRC said, making it tough to disentangle truth from fiction.

The typical victim loses about $2,000

A chief danger is divulging information about financial accounts or sensitive personal data (like a Social Security number) that criminals can then use to steal a job seeker’s identity.
Consumers reported losing $367 million to job and business opportunity scams in 2022, up 76% year over year, according to the Federal Trade Commission.
The typical victim lost a “whopping” $2,000, the FTC said.

Job scams aren’t the most prevalent fraud: They accounted for only 9% of total identity scams in 2023, second to Google Voice scams, which totaled 60%, ITRC said. (Google Voice scams trick people into sharing a Google verification code, which scammers can use for nefarious ends. They often target people on Craigslist and Facebook Marketplace.)
However, employment scams are an “emerging” threat, said ITRC president and CEO Eva Velasquez.
“Job scams have been around since there were jobs,” Velasquez said. “[But] they’ll continue to grow because of a number of external factors that are occurring.”

AI and remote work fuel job-scam growth

AI advancements are one of those factors: They allow scammers to generate job listings and recruitment messages that look and feel more legitimate, experts said.
“AI tools help refine the ‘pitch’ to make it more believable as well as compensate for cultural and grammar differences in language usage,” according to the ITRC report.
What’s more, the rise of remote work during the pandemic era have made workers and job seekers more comfortable with digital-only transactions, Velasquez said.

Job seekers may never see a physical person during a phony hiring or interview process: They may interact with a supposed recruiter only via text or WhatsApp message, Velasquez said, which amounts to a “big red flag.”
Recent college grads, immigrants or other people new to the U.S. workforce may think such digital-only hiring normal, especially for fully remote jobs, she said. But hiring generally doesn’t work this way, she added.

How job scams can rip you off

Con artists will “push you for money” during the hiring process, the FTC said.
They may send an invoice for advance payment of on-the-job equipment (like a computer ) or job training. They promise to reimburse you, but won’t, according to the federal agency.
Scammers may also ask for your personal information — like a driver’s license, Social Security number or bank account details — upfront in order to fill out “employment paperwork,” the FTC said.
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“Scammers will promise you a great job, but what they really want is your money and your personal information,” New York Secretary of State Robert Rodriguez said in a consumer alert this year.
Job seekers should not expect to have to hand over personal information until after they’ve received and accepted a job offer, Velasquez said. (While this is a good screen for legitimacy, it may not provide a safety guarantee in all cases, she said.)

How to protect yourself from job scams

Ultimately, “there’s no sure-fire way to detect” job opportunity scams, according to the FTC.
Here’s what you should know and how you can better protect yourself, according to Velasquez and the FTC:  

Don’t have a false sense of security on well-known job search platforms.
Independently verify the company exists and is hiring. Don’t accept a job offer until you’ve done your own research.
Be wary if you didn’t initiate contact with a prospective employer or recruiter. Instead, reach out to the company directly using contact information you know is legit.
Only limited personal information is generally required during the application process: name, phone number, job and education history, and perhaps email and home address, Velasquez said.
Digital-only interactions are a red flag. However, phone calls are also not a guarantee of security.
Honest employers won’t send you a check to buy supplies or anything else, then ask you to send back the leftover money. This is a fake check scam.
Be wary of something that sounds too good to be true. For example, a job ad for 100% remote work that requires few skills and a huge salary “is not realistic,” Velasquez said.

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