The pound-dollar and euro-dollar were flat today, 27 February 2024, with the dollar yen making the biggest move between 9:14 am and 4:15 pm. According to data I obtained from Bloomberg, the GBP/USD increased three pips, from 1.2682 to 1.2685. The EUR/USD decreased four pips, from 1.0848 to 1.0844. The USD/JPY increased 1600 pips moving from 150.3300 to 150.4900.
Maybe traders in yen were ready to move money into US securities. The yield on the 10-year Japanese bond held at .68% between 9:14 am and 4:15 pm today. UK ten-year gilts stayed flat going from 4.18% to 4.19%. The US 10-year climbed from 4.29% to 4.31%, while German 10-year bunds moved from 2.43% to 2.46%.
Yields moving up, as I shared yesterday, is what investors want. Banks, no matter what the mainstream media suggests, want an increase in net interest income. They can only squeeze consumers so much with increases in interchange and insufficient fund bank fees and will have to sell what they are primarily good at: money.
Congressmen and the President will have to raise their narrative game. America is a transactional economy. It needs its markets to generate taxable income. It also needs to avoid the political blowback that holders of bank stock and US Treasuries can create if they see lower real yields. Elected officials will have to craft narrative reconciling the investor, consumer, and bank positions.
As I shared yesterday, if you are a party to a forward exchange contract, political risks should be calculated and incorporated in your contracts.
Alton Drew
27 February 2024
Disclaimer: The above post should not be treated as legal or financial advice. Please retain and consult and attorney and/or financial advisor before making a foreign currency trade or investment.
For my take on the political economy, purchase my book at amazon.com/author/altondrew.
Alton Drew 