Ricardo Evangelista, a Senior Analyst at ActivTraders, said: “Sterling weakness is justified by the increasing likelihood of a no-deal Brexit.” e added: “[S]ources in Brussels alluded to increased toughness between the negotiating teams in the ongoing talks [with the UK].” With downside risks increasing for the pound, UK markets have remained subdued today. The euro, meanwhile, has been putting in a mixed performance with Eurozone markets remaining cautious after last week’s poor German production figures. 

Anatoli Annenkov, a Senior European Economist as Societe Generale, also said he expects a rate cut from the European Central Bank (ECB) this year, due to a possible US recession followed by “downward bias” expected in central bank’s forward guidance. 

The pound, meanwhile, failed to gain on the euro following the publication of the UK average earnings figures for May.

These beat forecasts, with growth in average earnings rising from 3.4 percent to 3.6 percent – the fastest rise in nominal wages in a decade. 

Overall UK unemployment for May held steady at 3.8 percent, the lowest level since 1974. 

The euro, meanwhile, was left unfazed by today’s release of the German ZEW survey of economic sentiment for July.

The index fell to a worse-than-expected -24.5, while the Eurozone ZEW economic sentiment gauge fell to -20.3 from -20.2. 

ZEW President Professor Achim Wambach noted: “The intensification of the conflict between the USA and China, the increased risk of a military conflict in the Middle East and the higher probability of a no-deal Brexit are all casting a shade on the global economic outlook.”

Further GBP/EUR exchange rate movement could occur later this afternoon following Bank of England (BoE) Governor Mark Carney’s speech.

The pound could continue to sink on any dovish comments about the near-term outlook for UK interest rates. 



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