The sharp drop in the US dollar in July could be a ‘potent’ driver for global reinflation, says Oxford Economics.
Reinflation can describe the first phase of economic recovery after a recession, like the one we’re experiencing right now.
Because most world trade is denominated in US dollars (USD), changes in the USD relative to other currencies impacts global trade volumes.
A weaker dollar can lead to stronger trade volumes; stronger trade volumes can lead to economic recovery.
A weak USD is especially good for more volatile emerging market currencies (EM FX) allowing major emerging economies like Brazil and India to recover faster from the global COVID-19 recession.
The benefits of a falling dollar could also vastly outweigh the costs for the US economy itself.
“We see surer signs that the tide is turning for the US dollar, despite any near-term wobbles generating a safe-haven bid,” Oxford Economics director macro strategy Gaurav Saroliya says.
“USD weakness has typically been an essential prerequisite for global reflation. Outside of the Trump tax cuts of late 2017, inflation expectations have not moved higher without a weaker greenback.
“Sustained weakness in the dollar will be an especially potent driver of global reflation in the current global environment.”
WINNERS
Here are the best performing ASX small cap stocks at 12pm Friday August 7:
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| CODE | COMPANY | PRICE | CHANGE | MARKET CAP |
|---|---|---|---|---|
| SUV | Suvo Strategic Minerals | 0.036 | 80.00% | $24.6M |
| 4DX | 4DMedical | 1.49 | 104.11% | $394.5M |
| KZA | Kazia Therapeutics | 0.85 | 51.79% | $53.0M |
| XTC | Xantippe Resources | 0.003 | 50.00% | $8.0M |
| KTE | K2 Energy | 0.028 | 40.00% | $8.4M |
| GED | Golden Deeps | 0.016 | 33.33% | $5.6M |
| LPD | Lepidico | 0.009 | 28.57% | $46.7M |
| RNE | Renu Energy | 0.025 | 25.00% | $3.0M |
| ARR | American Rare Earths | 0.031 | 24.00% | $9.6M |
| RMX | Red Mountain Mining | 0.009 | 21.43% | $8.1M |
| KGM | Kalnorth Gold Mines | 0.017 | 21.43% | $15.2M |
| EQE | Equus Mining | 0.018 | 20.00% | $31.7M |
| AHL | Ahalife Holdings | 0.006 | 20.00% | $4.0M |
| ESH | Esports Mogul Asia Pacific | 0.015 | 19.23% | $30.7M |
| AQI | Alicanto Minerals | 0.095 | 18.75% | $24.1M |
| AQD | Ausquest | 0.032 | 18.52% | $22.4M |
| PGI | Panterra Gold | 0.052 | 18.18% | $9.8M |
| MXC | MGC Pharma | 0.026 | 18.18% | $41.2M |
| NWM | Norwest Minerals | 0.13 | 18.18% | $10.9M |
New WA strategic minerals explorer Suvo (ASX:SUV) is having a great first day on the ASX, up 80 per cent in morning trade.
The US Food and Drug Administration (FDA) has awarded ‘Rare Pediatric Disease Designation’ to Kazia Therapeutics (ASX:KZA) drug which treats a “rare and highly-aggressive” childhood brain cancer.
Scandinavia-focused gold-base metals explorer Alicanto Minerals (ASX:AQI) got a boost after Ray Shorrocks joined the board as non-exec chairman.
Shorrocks was former chairman of red-hot ASX300 company Bellevue Gold (ASX:BGL), and is current chairman of multi-bagger gold stock Auteco Minerals (ASX:AUT).
Equus Mining’s (ASX:EQE) was also up after announcing a new drilling program at the high-grade, development-ready Cerro Bayo silver-gold project in southern Chile.
LOSERS
Here are the worst performing ASX small cap stocks at 12pm Friday August 7:
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| CODE | COMPANY | PRICE | CHANGE | MARKET CAP |
|---|---|---|---|---|
| ANL | Amani Gold | 0.001 | -33.33% | $7.8M |
| MGT | Magnetite Mines | 0.002 | -20.00% | $4.5M |
| DHR | Dark Horse Resources | 0.002 | -20.00% | $8.1M |
| TIA | Tian AN AU | 0.17 | -19.05% | $18.2M |
| LSR | Lodestar Minerals | 0.011 | -15.38% | $9.4M |
| AEF | Australian Ethical Invest | 5.1 | -14.86% | $572.0M |
| SMX | Security Matters | 0.36 | -14.29% | $46.5M |
| WTL | Wt Financial Group | 0.03 | -14.29% | $5.3M |
| ENA | Ensurance | 0.012 | -14.29% | $6.9M |
| TKL | Traka Resources | 0.025 | -13.79% | $10.0M |
| AKG | Academies Australasia Group | 0.2 | -13.04% | $25.5M |
| ANA | Ansila Energy | 0.02 | -13.04% | $10.2M |
| GMV | G Medical Innovations | 0.055 | -12.70% | $39.3M |
| XTD | XTD | 0.04 | -11.11% | $5.5M |
| ORN | Orion Gold | 0.017 | -10.53% | $49.3M |
| RTG | RTG Mining | 0.13 | -10.34% | $95.6M |
| SGC | Sacgasco | 0.026 | -10.34% | $8.1M |
| RLC | Reedy Lagoon | 0.009 | -10.00% | $3.6M |
| GME | GME Resources | 0.036 | -10.00% | $18.2M |