Reserve Bank of Australia's Hawkish Stance Expected to Strengthen AUD/USD
Investing.com - The upcoming release of the Reserve Bank of Australia (RBA) Board meeting minutes is expected to confirm the hawkish stance taken during their June gathering, offering support for a rising AUD/USD. The June meeting saw an unexpected increase in the cash rate by 25 basis points from 3.85% to 4.10%, as policymakers prioritized addressing elevated inflation and other economic factors over weaker labor market data.
In anticipation of these minutes, investors will be closely examining them for any additional insights into last month's rate hike decision, potential future rate increases, and what might lead the RBA to pause its current tightening cycle. Following recent strong Australian labor force reports, there is currently a 50% probability priced into interest rates that another 25 bp hike will occur at July's RBA meeting.
People's Bank of China Poised for LPR Rate Cuts Amid Economic Struggles
The People’s Bank of China (PBOC) appears set to reduce its one- and five-year loan prime rates (LPR) lending rates by ten basis points each – bringing them down to respective levels of 3.55% and 4.20%. This move represents yet another attempt at strengthening China’s struggling economy while also steering it away from deflationary pressures.
Earlier this month, PBOC cut medium-term policy loan rates for the first time in nearly a year; this action paved the way for anticipated benchmark LPR cuts that defy global trends focused on raising interest rates to control inflation. As a result, the yuan has experienced significant selling pressure – with values dropping 4% in recent months and reaching a seven-month low.
Berkshire Hathaway (NYSE:BRKa) Expands Holdings in Japanese Trading Firms
Berkshire Hathaway B (NYSE:BRKb) recently announced that its subsidiary, National Indemnity Company, has increased its average stake in five major Japanese trading firms to over 8.5%. The companies involved include Itochu Corp. (TYO:8001), Marubeni Corp. (TYO:8002), Mitsubishi Corp. (TYO:8058), Mitsui & Co., Ltd. (TYO:8031), and Sumitomo Mitsui Financial (TYO:8316); the combined value of these investments now surpasses any other non-U.S. holdings for Berkshire Hathaway.
The company intends to maintain these investments long-term with CEO Warren Buffett committing to only purchasing up to a maximum of 9.9% ownership within each firm. This news follows Buffett’s April visit to Japan where he revealed plans for increasing stakes after identifying similarities between the sogo-shosha businesses – general trading companies specializing in diversified long-term investments – and his Omaha-based conglomerate.
These five sogo-shoshas have traditionally played pivotal roles as importers of essential resources into Japan while also exporting finished products globally. Currently, Berkshire Hathaway does not possess any additional investments within the country.