It looks like American investors are still switching away from bonds in July as per the recent data of the ICI. I have put together a few of my usual charts to visualise this. The appetite for bonds is a mirror of what it is for equities.
As mentioned in my previous post on the same subject my feeling is that we could see all this impact the strength of the US$ . Many economists out there are entrenched in their scenario of rising yields and GDP for the USD over the medium term with a strengthening of the US$. Whereas I agree on the rising yields and GDP in the US, I somehow strongly disagree on the effect on the US$. Clearly the world has had a domestic bias since 2008 and this has been reflected on the risk adversity of the average US investor asset allocation which was primarily dominated by bonds and somehow local equities. If investors become a bit more adventurous , they will start to invest more significantly in international equities (as shown in the above charts) therefore they will need to sell some US$ in the process. In that scenario it may well be that the EURUSD does not present such a bad value at 1.3280……