The report has made Sterling traders slightly more optimistic about the economy as increasing wage growth lends support to consumer spending. However, the UK ILO unemployment rate figure for June came in worse-than-expected, rising from 3.8 percent to 3.9 percent – although this remains relatively low in historic terms. Peter Hemmington, a partner at the accountancy firm BDO, was downbeat: “This could be the beginning of the end of the strong employment market in the UK. It has remained one of the more resilient pillars of the UK economy, even in the face of Brexit.”
Brexit uncertainty continues to dominate headlines, with Prime Minister Boris Johnson facing further pressure from MPs pushing for a no-confidence vote in September – an attempt to thwart a disorderly exit from the EU.
Stephen Barclay, the Brexit Secretary, also raised concerns over the Irish backstop and insisted the UK would leave on October 31 – deal or no deal.
He said: “[W]hile we’re ready to energetically enter into new negotiations in a spirit of friendship, the backstop must go.”
However, the Irish Taoiseach Leo Varadkar said renegotiations with Boris Johnson next month would not include the Irish backstop.
This left Sterling traders jittery as the UK and EU appear to remain deadlocked over Brexit.
Euro traders became apprehensive today as Germany – the largest economy in the Eurozone – continues to show signs of heading towards a possible recession in the near-term.
Today’s German ZEW economic sentiment survey for August plummeted by more than forecast, shrinking from -24.5 to -44.1 – the lowest level since December 2011.
Professor Achim Wambach, ZEW President, said: “The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations, and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth.”
Meanwhile, Germany’s final year-on-year consumer inflation figure for July came in at 1.7 percent, unchanged from previous estimates.
Looking ahead, the pound to euro exchange rate could hold onto gains made today if tomorrow’s German GDP figure confirms forecasts by contracting in the second quarter.