Bond Yields Crash as Central Banks prepare for action
Global Stock Markets rise for the fourth day after facing big falls immediately after the announcement that Britain was to exit the European Union. As a consequence of this exit Bond yields around the world have hit record lows with the prospect of further cuts to interest rates if needed by the major Central Banks in the world. Once again we see the Share Markets rally on negative news, as investors and Hedge fund Managers chase higher yields that are paid in dividends by companies rather than Government bonds. The 30- year US Treasury Bond yield hit its lowest level of 2.189 percent since the 1950s, which would confirm that the Federal Reserve have no intentions of rising rates this year. There is a possibility of more Monetary stimulus if needed by the Federal Reserve.
Gold and Silver
Gold and Silver prices have soared with the prospect of a weaker dollar and further monetary policy easing. We have seen gold gain 8.8 percent in June to $1,341.00 an ounce the biggest rise since February 2016. Silver prices have rallied to $19.64 over the last few weeks seeing the metal at its highest level in nearly two years. This is the result of uncertain and volatility seen throughout the Markets in the weeks leading to the Brexit referendum.
Pound Sterling to regain Strength
In the short term the pound appears oversold and the vote to leave the European Union has had a negative effect on Europe’s economy as they were struggling to stimulate growth before the Referendum. This has created some good trading opportunities in subsequent weeks as investors digest the turn of events. The British economy was showing strong signs of recovery that was reflected in the strengthening pound prior to the referendum. However once the guidelines of Britain’s exit are decided, only then will we get a clearer picture of the full impact of the no vote on the economy. What remains to be seen is if other EU members follow the UK and hold their own referendums, which would signal the beginning of the end of the European Union and indeed the Euro Dollar.
The European Union have an extremely difficult task in balancing the exit of the UK. They must not appear too overcompensating whilst discouraging other members to exit without significant consequences. Beyond the short term volatility, the long term prospects of Britain are strong and remain very attractive for investors.
Discover financial freedom and learn to trade Foreign Exchange with a global award winning educator. Register for a FREE workshop today!