A sense of caution seems to be the theme for the financial markets as trading gets underway for the week, with investors braced and preparing for an incredibly busy week packed with both crucial economic reports and major risk events.
The fact that Sterling sharply depreciated across the board on Tuesday, after British inflation rates unexpectedly dropped to 2.6% in June, continues to highlight how the currency has become increasingly sensitive to monetary policy speculation.
It has certainly been an eventful week for the financial markets, as comments from central bank heavyweights which fueled monetary policy speculations and political uncertainty in Washington, breathed life back into the currency and equity markets.
It appears that equity markets have taken inspiration from the performance of the financial market at the conclusion of last week, with Asian stocks trading broadly higher and European shares looking positive at the time of writing.
It’s quite interesting how Sterling remains resilient despite being constantly bombarded by political risk and economic woes over the past year. Last week’s awe-inspiring rebound, which was trigged by Bank of England Governor Mark Carney’s hawkish remarks, is a testament to this, as the Britsh pound/U.S. dollar currency pair concluded Q2 above 1.3000.