Pound plunges to 10-year low against euro

Sterling pares back some losses as turmoil in Italy deepens but remains perilously close to all-time low against single currency

Ben Chapman
Monday 12 August 2019 17:20 BST
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Louise Thomas

Louise Thomas

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The pound plunged to a 10-year low against the euro early on Monday morning before recovering some of its losses amid turmoil in the eurozone.

Shock news on Friday that the UK economy shrank 0.2 per cent in the latest quarter, alongside increasing fears surrounding an imminent no-deal Brexit, helped to drag sterling to €1.0724, its lowest level against the euro since the financial crisis and close to its all-time low.

The pound began to claw back some ground, helped by Italy’s political problems which dragged the single currency downwards.

Italy’s right-wing deputy prime minister Matteo Salvini threatened to bring down Italy’s coalition government by withdrawing the seven ministers belonging to his far-right Five Star Movement.

Despite those ructions the pound could make few gains on the euro, trading 0.18 per cent up at €1.076 at the end of the London session. Sterling rose 0.3 per cent against the dollar to $1.207.

Sterling may have received some support from the news that a cross-party group of MPs is meeting to discuss ripping up the Commons rulebook in a bid to prevent Boris Johnson pushing through a no-deal Brexit on 31 October.

Senior figures involved in the conversations believe the most likely chance of success would be a bill compelling the prime minister to seek an extension from the EU if there is no deal in place by Halloween.

Brexit remains the major driver behind sterling’s movements but the latest economic data on wages, due on Tuesday, will also be closely watched.

Connor Campbell, financial analyst at Spreadex said: “Desperately searching for a bit of good news, the pound will be praying for a strong wage growth figure on Tuesday, even if any positive headlines not related to Brexit are merely a plaster where emergency surgery is needed.”

Wages have provided one of the less gloomy economic indicators in recent months, with pay rises outpacing inflation giving households a boost after years of stagnation.

In the markets, the FTSE 100 closed 0.4 per cent higher at 7,226.72. On Wall Street the Dow Jones dropped more than 130 points after the opening bell after Goldman Sachs warned of the rising risk of a US recession as trade tensions with China become increasingly hostile.

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