Pound slips vs euro on political turmoil, weak wages data

Wed Jun 14, 2017 12:36pm EDT
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By Jemima Kelly and Ritvik Carvalho

LONDON (Reuters) - Britain's pound slipped toward a seven-month low against the euro on Wednesday, hurt by political uncertainty and weaker-than-expected earnings numbers that underscored the economic challenges Britain faces as it leaves the European Union.

Against a broadly weaker dollar, sterling was up on the day, topping $1.28 GBP=D3 for the first time since last week's UK election results. The dollar slipped on weaker-than-expected inflation and retail sales data, with traders betting the U.S. Federal Reserve would strike a cautious tone when it concludes its meeting on policy later in the day. [FRX/]

The pound had earlier been recovering from its almost 3 percent slide against the euro since the Conservatives unexpectedly lost their parliamentary majority last week. It was bought on hopes the outcome of the vote could spell a "softer" Brexit in which Britain keeps preferential access to - or even stays in - the European single market.

But data showing British workers' earnings after inflation are shrinking at the fastest pace since 2014, squeezing consumers the country relies on for economic growth, pushed sterling down against both the euro and initially the dollar before the U.S. data came in.

On Tuesday, figures showed a rise in inflation to its highest level in four years, adding to British consumers' pain.

"Prices are growing faster than pay, which doesn’t bode well for real-terms consumer spending, especially with the household savings ratio being so low," said RBC economist Sam Hill.

"We maintain the view that the MPC (Bank of England monetary policy committee) will stick with the choice of a longer period of above-target inflation."

A BBC report that a deal to obtain support from Northern Ireland's Democratic Unionist Party, which Prime Minister Theresa May needs to form a government, would not now be signed on Wednesday, drove the pound further down.   Continued...

FILE PHOTO: A bank employee counts pound notes at Kasikornbank in Bangkok, Thailand October 12, 2010.  REUTERS/Sukree Sukplang/File Photo