Mark Gilbert is a Bloomberg Gadfly columnist covering asset management. He previously was a Bloomberg View columnist, and prior to that the London bureau chief for Bloomberg News. He is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”

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.

Weakest in More Than a Year
Source: Bloomberg

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.

Getting Poorer
U.K. inflation continues to outpace wage growth
Source: Office for National Statistics via Bloomberg

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.

Consumers Are Losing Faith
GfK's barometer of consumer confidence shows optimism is slipping
Source: GfK via Bloomberg

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.

Heading for the Lows Again?
The pound has lost more than 6 percent against the euro this year
Source: Bloomberg

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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