Sterling held above 1.32 against the dollar early Thursday as traders eagerly await the Bank of England's policy meeting today. Bond yields declined from July highs but remained elevated, as some market participants believe that the BoE may surprise, with a 25-basis point rate hike.
It should be an interesting day for markets on Wednesday, with the UK releasing data on second quarter growth this morning, the US Federal Reserve announcing its latest decision this evening and crude inventory data being released after API reported a substantial reduction.
Asian shares were mostly mixed during early trading on Wednesday, while the Greenback held steady ahead of the Federal Reserve decision later today which is largely expected to conclude with monetary policy unchanged.
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.