So much for thinking the great British pound may have found a base when Boris Johnson resigned as Foreign Secretary and the pound hardly reacted. On Thursday the pound fell below 1.3 to the US dollar as the Brexit uncertainty continues. This week we also saw the latest inflation data reporting that inflation remains unchanged at 2.4%. This may take the pressure of the Bank of England to consider raising interest rates in August, further undermining sterling.
One currency that is considered a measure of risk appetite is the Japanese yen, as it’s a currency that attracts investment during times of uncertainty. The Yen is now trading back to levels it was at the start of the year against the US dollar. This yen weakness could be indication speculators are feeling bullish despite all the global uncertainty.
Political uncertainty will always create volatility but it is not until the impact appears to affect economic growth that stock markets take note. The may well be why the mess Donald Trump made of a press conference with Putin had little or no impact on global markets. Whether Donald Trump impact on the global stage is a positive for growth or otherwise is probably a subject that could be debated long and hard.
Earnings will continue to dominate this time of the year, so far only a small percentage of US companies have reported. At present 85% have beaten on expectations according to Factset which is encouraging.