The pairing fell after the UK Markit construction PMI figures for May contracted to 48.6, weighing on market confidence in the pound as the UK economy falters. Duncan Brock, a Group Director at the Chartered Institute of Procurement and Supply, was downbeat, saying: “A fragile dreariness descended on the sector this month with lower workloads leading to the fastest decline in purchasing of construction materials since September 2017.” Today also saw the disappointing UK like-for-like retail sales figures for May, which slumped by -3.0 per cent. Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), said: “While May 2018 offered almost unbroken sunshine, topped off by the run up to the World Cup and the marriage of Meghan and Harry, May 2019 delivered political and economic uncertainty.”
“With retail conditions the toughest they have been for a decade, politicians must act to support the successful reinvention of our high streets and local communities.”
The Prime Minister, Theresa May, in one of her last acts as the leader of the Conservative Party, has commented that a US-UK would make a “great partnership” post-Brexit.
US President Donald Trump, who is visiting the UK at present, also seemed to hint of this possibility, tweeting: “[B]ig Trade Deal is possible once U.K. gets rid of the shackles. Already starting to talk!”
The euro, meanwhile, edged higher against the Pound following better-than-expected Italian unemployment figures, which remained steady at 10.2 per cent, narrowly avoiding their forecast increase.
Today will also see the printing of the Eurozone’s flash consumer price index figures for May, which are expected to sink, potentially weakening the single currency.
Euro traders are remaining cautious, however, with concerns rising ahead of Thursday when the European Central Bank (ECB) will announce its latest interest rate decision, while worries are rising that the eurozone economy is weakening.
Erik Nielsen, Chief Economist at the Italian lender UniCredit, sounded a note of warning, saying: “With substantial risks to the economic outlook and markets … sending inflation expectations scarily low, bold monetary action is needed.”
With Brexit and the future of the Conservative Party leadership at stake, we are not expecting Sterling to make any sudden gains this week, as politics continues to drive the GBP/EUR pairing.