British Pound remarkably low against major currencies 25-Feb-2016

Since the beginning of this month, GBP has sharply gone against major currencies such as USD, JPY, AUD or NZD though GBP peaked out in last Autumn of 2015.

Compared with the level at the end of 2015, GBPJPY got the sharpest decline more than 12.0% down, GBPUSD is following down at 6.0%, and even against AUD and NZD, GBP has gone down 5.0% and 3.6% respectively.

Due to the rate cut of AUD and NZD for a last few years, GBP and other currencies have been relatively stringer against AUD and NZD whose interest rates are more stable now than before.
However, even though their rates had been cut, the policy rate in

Australia is still 2.0% and it is 2.5% in New Zealand while the rate in England is only 0.50%. Also looking at the credit rating of sovereign debts of them, S&P rated AAA (stable) for Australia, AA (stable) for New Zealand and AAA (negative) for United Kingdom. Simply thinking, Australia has better credit rating and more interest rate, which of Australian or English debt do you want to invest?

We cannot miss out that global stock markets have been downward and volatile since the beginning of the year. The market shows

some symptoms of financial crisis, particularly strength of JPY and weakness of GBP. Remember Lehman crisis 2008, JPY had been the strongest currency in the market.
What happened in crisis probably happens now again, it is still a question from the view of investment because Japan has S&P rating only A+ (stable) and negative interest rate at -0.1%. Do you want to invest?

2015 was geopolitically unstable year, and 2016 will be economically and (geo)politically unstable due to the volatile market, US president election, Brexit, Spanish goverment, ...


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Bond market is still far away from last crisis level 7-Jun-2015

Since beginning of this month, Jun 2015, the bond price has gone down sharply, rising government bond yield. Media reacted to the market as if another crisis is coming.

[10 year government yield]

Considering the economic situation, such as potential collapse in financial aid for Greece where the leading party of government is rejecting proposals from other European countries, the debt market could be crashed once such crucial event is triggered.

[10 year government yield except Greece]

With in last two years, the government bond market has been hot in some major economic zones, including UK, US, Japan or Germany. Since the market trend was almost single direction, the yield going down, the trend reversal could be occurred in natural manner.

However, even the government yield has hiked recently, it is too early to see the market crisis. The  chart describes the yield of 10-year government bond. The most of them still stays around record low level of the last decade. Particularly in Greek, Spanish and Italian bonds, the yield is still far lower than those under the European debt crisis in 2011 - 2012.

(CNBC) Pay attention to the chaos in the bond market
(The Telegraph) Global bond market suffers from erratic swings amid liquidity drought

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Australian dollar attractive now? 12-Jan-2015

Australian interest rate, 2.5% in policy rate, is the highest rate in developed economic zones whose sovereign bond holds top credit rating, AAA by S&P for example.

Some of the investors are likely looking Australian bond as the attractive product in the market. (Australian bonds yields touch recordlowin investor flight to safety)
 Australian dollar has declined against some major currencies, such as USD or GBP for last 2 - 3 years, and the trend reversal might be expected.

Source: Government of Western Australia
Department of Mines and Petroleum

The most important risk factor to keep in mind is China risk. Australian economy highly relies on Chinese economy, particularly, in Australian mining industry. China is the top importer of major commodities from Australia, such as Iron ore, Gold or Heavy mineral sands.

Australian mining sector contribute for around 20% of GDP, and the top importer from the sector is China. When Chinese economy slow down and their demand for commodities is shrink, Australian economy will decline due to the high dependence on Chinese economy.

Despite those risk factors, uncertainty in global economy, particularly European economy would be riskier for the investors.

Ref. Government of Western Australia Department of Mines and Petroleum