The Office for National Statistics (ONS) report showed that inflation remained at 2 percent, the same as May. This means that workers are benefitting from real wage growth, as yesterday’s UK jobs data showed that earnings rose by 3.6 percent in the second quarter of 2019. Commenting on today’s data, Head of Inflation at the ONS Mike Hardie said: “The overall rate of inflation remains steady, with no change in pace this month. Petrol and diesel prices fell this year but rose a year ago, while clothes prices dropped by less than this time last year.” However, the report did nothing to buoy Sterling as Brexit pessimism continued to dampen sentiment in the UK currency.
GBP/EUR losses were limited however as yesterday’s ZEW business confidence reports showed declining sentiment in Germany and the Eurozone as a whole.
ZEW revealed that investor economic sentiment in Germany deteriorated more sharply than expected, falling from -21.1 in June to -24.5 in July.
ZEW President Achim Wambach noted that the increasing pessimism among German investors was likely caused by a continued decrease in orders for German industry.
Added to this, Mr Wambach said: “A lasting containment of factors that are causing uncertainty in the export-oriented sectors of the German economy is currently not in sight.
“The Iran conflict seems to be intensifying and the ongoing trade dispute between the United States and China is a burden not only for Chinese economic development.”
However, GBP/EUR was still able to fall to €1.105 for the first time since January as both Boris Johnson and Jeremy Hunt promised to get rid of the Northern Ireland backstop.
It would take a solid increase in UK consumer spending in Thursday’s retail sales report to lend the pound support.