The pound has been steadily weakening over the past week as ongoing Brexit talks take place across Theresa May’s Conservative party and the opposition Labour Party. Reports suggest a cross-party deal may be reached, however doubts about such an agreement have continued to weigh on the pound. Sir Kier Starmer, the shadow Brexit secretary, has also added that up 150 Labour MP’s will oppose any deal which does not include a referendum to confirm it. Something which historically Teresa May and many of her MP’s have been strongly opposed to.
This morning saw the release of the UK labour market data. Average earnings fell from 3.5% to 3.2% for the same period year on year, while the unemployment rate declined to 3.8% from 3.9%. While the unemployment news was positive it did little to prevent the pound falling to lows of 1.1505 against the euro and 1.2924 against the US dollar. The UK data calendar is experiencing an uncharacteristically quiet week with MPC member Heskel speaking on Thursday being the only other event of note.
For the Eurozone, the main data release was the German ZEW Economic Sentiment data which was released this morning. The data was forecast to increase from 3.1 to 5.1, however a sharp decline saw the data release at -2.1. As Germany is Europe’s largest economy the data is seen as an indicator on the economic health of the Eurozone. This evening FOMC member Esther George is due to be speaking on the US economy so some volatility can be expected.