When fears about the global economy reached fever pitch, investors fled to the safety of the dollar. Now they’re doing just the opposite.
To give you an idea, it’s about $1.70 to the British pound right now, and about $1.45 to the euro. Part of that is because as corporate results improve, investors are more willing to take on more risk again. Howard Howard Wheeldon, senior strategist at BGC Partners in London says that’s leading some to overseas markets. Corporate results in the U.S. are good. The problem is the real growth that we’re seeing is only limited to China, India and indeed the far East as a whole. Indeed, the U.S. economy shrank 1 percent in the second quarter, a lower than expected amount which investors are attributing to government spending.
The fear is that at some point when the Fed decides to move on on interest rates, which it will have to do at some point, that will reintroduce inflation. And send commodity prices higher as investors look for more profitable opportunities than the greenback.