Investors leaving safe havens

We had further evidence of investors’ growing confidence overnight when Japanese data showed a sizable drop in foreign investor ownership of Japanese government Bonds (JGBs). JGBs are a bellwether for investor confidence because they are used as a safe haven in times of strife, in the same way that US Treasuries are used. Neither yields any worthwhile return but you’ll get your money back. Reducing ownership by overseas investors is clear evidence that those investors are gaining the confidence to seek higher yields elsewhere.

106% rise in Chinese profits

And whatever happened in Wuhan; whether it was a bat in a market place or a test tube in a lab that leaked Covid-19, it may have crippled the global economy but China had just announced a 106% rise in industrial profits on the year. So it didn’t damage China too much did it. That’s one for the conspiracy theorists.

The other overnight news was a huge rise in capital expenditure in Australia. That was an across-the-board rise, so I expected the Australian Dollar to be stronger this morning. However, it has only gained half a cent against the Pound (AUD 1.8210 as I write).

US GDP awaited for USD direction

Today’s big news comes wrapped in a stars and stripes banner. The US economic growth data (GDP) should show upwards of 6.5% growth; further evidence of a recovery of sorts in the US. That will be followed by the weekly jobless claims data, which is expected to show another reduction in the number of fresh welfare claims.

Having spiked above $1.42 at the end of last week, the GBPUSD rate has dropped about a cent and a quarter since then. The EURUSD rate is only 70 basis points lower, reflection more profit taking against the Pound. Some of this recovery in the value of the USD relates to talk of the Federal Reserve starting to consider a reduction in quantitative easing and a lot of speculation about the timing of the first post-covid interest rate hike. Not this year, I suspect.

It is worth noting that, following a 6 cent drop, the GBPNZD rate is more stable right now. It has settled around 1.9350, now that traders have had their fill. That makes Sterling look very affordable to NZD sellers. This pair may still trickle down to 1.92, where it found a bottom in April though.

And I have a new saying for you; less sexist than the original. Hell hath no fury like a Cummings scorned. It isn’t everyone who gets a world stage to vent their spleen is it.

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