Bond Outlook November 15th

The euro zone an "island of stability", Japan achieving good growth, the UK with a strong currency and the USA slowing, but gently -- indeed the outlook for a soft US landing and global rebalancing looks very positive. Inflation everywhere is headed downwards in most economies, including the euro zone and the USA, reaching target (or "comfort") levels. It remains a little mysterious why central banks are so hawkish, but it may be hoped that it is because they just want to ensure that the expansion is steady.

A significant component of global rebalancing is currency adjustment. Currency exposure is fundamental in fixed-interest investing, and is worthy of consideration in its own right. Our views are not those of currency traders, but are aimed at determining long-term trends. We offer them to readers in all modesty:

• The USD is in long-term decline and extremely vulnerable to Central Banks', especially, but not only, China's, intentions to diversify reserves. A weaker dollar is one ingredient of the lessening of the USA's consumption (another is the return of households to saving) .