The pound took another pasting on the currency markets Wednesday, dipping below last year's low and extending a trend that's seen it lose more than 6 percent of its value against the euro so far this year. As the wrangling over Brexit worsens, it looks like the trend is your friend.
The U.K. economic backdrop continues to suggest that Bank of England threats to raise interest rates are hollow. Tuesday's figures showed annual inflation running at 2.6 percent, outpacing the central bank's 2 percent target. But data on Wednesday showed growth in average weekly earnings continues to undershoot the acceleration in consumer prices even with unemployment at its lowest level since 1975.
With Britons getting poorer, no wonder consumer confidence is deteriorating. It's at risk of slumping to its weakest in several years when the next survey is released at the end of this month.
By contrast, the euro zone economy continues to go from strength to strength. Figures Wednesday showed Italy's economy expanded for a tenth consecutive quarter in the three months through June. The bloc as a whole grew by 0.6 percent, double what the U.K. achieved in the second quarter. And investors and traders tend to favor the currencies of better performing economies to those faring not so well.
So while the current currency-market story is as much about euro strength as it is pound weakness, that disparity looks likely to persist as Brexit looms large over the U.K. economic outlook.
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