Pound hits 27-month low as no-deal Brexit fears grow - as it happened
Sterling is sliding as UK and Brussels head for fresh clash over the Irish Backstop
- Pound slides as Hunt and Johnson say backstop is dead
- Pound hits 27-month low vs dollar, 6-month low vs euro
- Conservative leadership rivals hurt sterling
- Weaker pound will drive up cost of foreign holidays
- Full story: EU to reject Johnson and Hunt's plan
5.11pm BST
Time for a quick recap
Related: EU expected to reject outright Johnson and Hunt's backstop plan
Related: UK pay growth strong despite economic slowdown fears
Related: Ryanair to cut flights due to Boeing 737 Max crisis
Related: Sir Philip Green's Arcadia rescue plan faces US legal challenge
Related: Irn-Bru maker warns over profits after bad weather and sugar tax
4.38pm BST
The pound's losses deepened this afternoon after Sky News reported that Boris Johnson had devised a cunning plan to stop MPs blocking a no-deal Brexit.
The front-runner to become Britain's next prime minister is, apparently, considering scheduling a new parliamentary session in early November. That would mean parliament would shut down for the last couple of weeks of October - just when the Brexit deadline approached.
Boris Johnson could send MPs home for up to two weeks in October under plans being considered by his campaign.
Insiders have confirmed they are looking at scheduling a Queen's speech to mark the start of a new parliamentary session in early November.
Sky News
Team Boris Johnson considering plan to suspend parliament before Brexit by organising Queens Speech in early Novemberhttps://t.co/GmL0rJ4FE4 pic.twitter.com/5RMZIdsh1f
This is a sign of Boris Johnson's seriousness leaving the EU on Oct 31. Brexiteers are aware and pleased with this
Whitehall officials are also aware of the Queen Speech plan which means Commons not sitting 1-2 weeks
4.32pm BST
Sterling fell to lowest level vs dollar since April 2017, just below $1.24 a few moments ago, down 6% since May, as possibility of No Deal Brexit rises, especially after the comments of Johnson and Hunt on junking Irish backstop.
4.26pm BST
The slump in sterling is driving the London stock market higher tonight.
A weaker pound makes overseas earnings in foreign currencies more valuable. That means higher profits for exporters, in sterling terms anyway.
4.11pm BST
Newsflash: Christine Lagarde has submitted her resignation as head of the International Monetary Fund, effective from 12 September.
That's not a big surprise, as Lagarde has already been chosen to head the European Central Bank. But it may speed up the process of selecting her successor.
Christine Lagarde is to resign as head of the IMF from September 12th, to focus on her nomination as ECB president: pic.twitter.com/A7alHC30cR
3.39pm BST
John McDonnell MP, Shadow Chancellor, has blasted Boris Johnson and Jeremy Hunt for weakening the UK currency with their attacks on the Irish backstop.
"The instability and uncertainty caused by the Conservative Party leadership contest has real world consequences.
The commitment of both contenders to a No Deal Brexit makes it even more important the Government put an end to playing games with people's livelihoods and call a General Election now."
3.36pm BST
With Brexit pressure building, the pound has just tumbled through the $1.24 mark for the first time in 27 months.
Sterling has dropped as low as $1.2396 for the first time since early April 2017, as investors fret that a no-deal Brexit is more likely.
Sterling under $1.24 since April 2017!!!
"If the Brits really think we are so scared of a no-deal Brexit, they are being naive."
2.51pm BST
Neil Wilson of Markets.com suspects that the tough talk about no-deal Brexit's could fade as the 31st October deadline approaches - possibly giving the pound some support.
Both Conservative leadership candidates are taking the hard line on Brexit to appeal to the Tory membership.
As previously stated, we have to remember that once faced with the granite reality of Number 10, recalcitrant MPs and the EU, there may be a softening.
2.38pm BST
Sterling slides to $1.24, weakest level vs dollar since April 2017.
If you think confidence in a country's economic, financial and political outlook is reflected in its exchange rate... pic.twitter.com/RMbqmHEibH
2.16pm BST
How much lower could the pound go?
Capital Economics have calculated that sterling could slump as low as $1.15 against the US dollar after a no-deal Brexit, down from $1.24 today.
In a no deal scenario, both exports and imports would plunge as delays at the ports would prevent goods from entering and leaving the country for a few weeks. Weak domestic demand in the aftermath may mean imports take longer to recover.
As a result, the external sector might provide some support to the economy, but only enough to offset a fraction of the overall slowdown in GDP growth
1.42pm BST
Many ministers opposed to a hard Brexit expect to lose their jobs once Boris Johnson becomes prime minister.
My colleague Andy Sparrow reports that some farewell presents have already been dished out in the House of Commons:
There is a real end-of-term feeling in the Commons at the moment. John McDonnell, the shadow chancellor, gave Philip Hammond, the chancellor, what was effectively a leaving present in Treasury questions recently - a book of radical walks. Today Greg Clark, the business secretary, gave a model car to his Labour counterpart, Rebecca Long-Bailey. Clark handed over the gift after speaking about changes to the UK automotive industry and new electric vehicle projects.
Hammond and Clark are both expected to be sacked next week, largely because they are both firmly opposed to a no-deal Brexit. Boris Johnson and Jeremy Hunt, the two candidates left in the Tory leadership contest, insist no-deal must remain an option, and their comments about the backstop last night have made it even more probable.
1.17pm BST
Nick Macpherson was formerly the top civil servant in the UK Treasury, helping to steer Britain's economy through the financial crisis a decade ago.
He's alarmed that both Johnson and Hunt seem quite happy to "debauch" the pound, in their search for the support of Conservative Party members.
Maintaining the purchasing power of the sterling is a core responsibility of the British state. Tory governments used to understand this. But the two candidates to be our next PM seem determined to debauch the . This won't end well. #soundmoney https://t.co/bQWkQRneoJ
the #pound hits 27-month low on the 'Boris Johnson effect', a traders' rule of the thumb which pushes forex traders to sell #GBP whenever the Tories frontrunner talks about #Brexit . @graemewearden
1.04pm BST
The pound could slide further, as the next Brexit deadline (31 October) approaches, warns analyst Stephen Innes of Vanguard Markets:
Sterling has been under intense selling pressure after both candidates for UK Prime Minister's position toughened their stances on the Withdrawal Agreement and the Irish backstop at the final debate which suggests the Pound will remain extremely vulnerable if the no-deal Brexit continues gaining momentum.
12.42pm BST
Jordan Rochester, FX strategist at Nomura, says investors aren't convinced that Johnson will convince EU leaders to drop the backstop, if he becomes prime minister.
It will take a big charm offensive by Boris Johnson to move them. Hence why folks are saying this increases the risks of a no deal Brexit."
"Over the next few weeks and months, the UK will have a new prime minister, chancellor, cabinet, Bank of England governor, budget and Brexit plan. Despite all the above, foreign exchange volumes are near historical lows once again. This is unlikely to last."
12.33pm BST
Thu Lan Nguyen, a currency strategist at Commerzbank, says the chance of Britain leaving the EU with a deal are falling (just like the pound!)
The pound weakness is a reaction to the two prime minister contenders opposing the Irish backstop, which dramatically reduces the chance for a Brexit with a deal.
"So this leaves only two options, no-deal Brexit, or no Brexit. As both Johnson and Hunt have made clear they want Brexit, chances of a no-deal Brexit are rising."
The British pound falls to the lowest level since 2017 as the market once again reckons with a no-deal Brexit risk https://t.co/ofQCh8hDtA pic.twitter.com/6IcAPoBkxb
12.29pm BST
Johnson and Hunt's hardline pitches on Brexit have worried the City, says Vasileios Gkionakis, global head of forex strategy at Lombard Odier, the Swiss banking group.
"The market is pricing in a higher probability of a no-deal Brexit and an increase of economic pressure."
You have the perfect storm for sterling,.
12.23pm BST
The People's Vote campaign, who are calling for a second EU referendum, say holidaymakers will suffer from Johnson and Hunt's hardline views on the Backstop.
They point out that the pound has weakened during the Conservative leadership campaign, in which most candidates took a hard line on Brexit.
"Boris Johnson and Jeremy Hunt want to impose a hard Brexit, or even a destructive No Deal on us, without giving us the final say. That won't just threaten jobs in the car industry, steel or financial services, it will hit ordinary families hard by trashing the value of the pound and sending the price of everything from petrol at the pumps to two weeks at Disneyland soaring.
"It is not democratic, not fair and not legitimate for this decision to be only in the hands of the 0.25% of the population who are members of the Conservative Party. With so much at stake for all of us, then the decision must be in the hands of the people with a final say referendum.
This Brexit crisis has come down to a simple question about whether we live in a democracy: no one has the right to force a destructive No Deal on the country without all of us having our voice heard in a People's Vote."
12.13pm BST
City traders are selling the pound in droves, after hearing Boris Johnson and Jeremy Hunt both put the boot into the Irish backstop in their debate last night.
The backstop is a key part of Theresa May's Withdrawal Agreement, and would keep the UK locked in a customs union after Brexit if a free trade deal isn't agreed.
"The problem is really fundamental. It needs to come out."
I think the problem is very fundamental. It has been devised by this country as an instrument of our own incarceration in the single market and customs union. It needs to come out."
The backstop, as it is, is dead.
I don't think tweaking it with a time limit will do the trick.
12.04pm BST
Today's selloff is driving the pound down to the 27-year lows suffered in early 2017, in the months after the EU referendum.
11.53am BST
NEWSFLASH: The pound has just hit its lowest level against the US dollar in over two years, as fears of a no-deal Brexit grip the financial markets.
Sterling has fallen to just $1.2420, shedding a whole cent today, to its weakest point since April 2017 (shortly before Theresa May called her ill-fated general election).
Pound sterling after the two UK would-be PMs said they would ditch the Irish backstop. Keep up the good work. pic.twitter.com/1tHONFJRJG
Related: Hunt and Johnson: the backstop is dead and can't be in any EU deal
Brussels had already rebuffed such a plan when the Brexit secretary, Steve Barclay, who is now part of Johnson's campaign, met the EU's chief Brexitnegotiator, Michel Barnier, last week.
In what was seen as "spinning for a Boris plan", Barclay told Barnier that the backstop was dead five times during the meeting. Sources say he told Barner that they wanted a series of mini deals and alternative arrangements for the Irish border.
Related: EU expected to reject outright Johnson and Hunt's backstop plan
The pound sterling is the worst performing major currency in the world over the past 24 hours, over the past month, over the past three months and over the past year pic.twitter.com/NfdkwHvQCU
11.43am BST
TUC general secretary Frances O'Grady is urging the government not to be complacent about the labour market:
"Wage growth is still below pre-crisis levels. Today's figures are little consolation for workers still feeling the effects of the longest pay squeeze for 200 years.
"Working people are facing huge uncertainty. With the Bank of England expecting growth to flatline, the government must act to support the economy.
Real wages are continuing to grow modestly, but after a decade-long pay squeeze that's costs workers thousands, modest real wage growth isn't enough. pic.twitter.com/LdRYN2eoLr
11.24am BST
New @ONS stats show that:
- the employment level is at a record high
- there are 3.7m more people in work than in 2010
- wages have grown faster than inflation for almost a year
- female unemployment has fallen to a new record low of 3.6% pic.twitter.com/V9C5NMXW9l
11.00am BST
Andy Bruce of Reuters has also spotted that rising self-employment is making up for a drop in the number of employed workers.
Cause for concern?
That there was any employment growth at all in 3 months to May is down to a hefty increase in self-employment.
Employee jobs declined at fastest rate since 2011. pic.twitter.com/cg05f02Az2
Along these lines, looks clear that vacancies have peaked already. pic.twitter.com/t06diHVMRn
10.54am BST
The Resolution Foundation have produced some neat charts showing how wages are growing across the UK economy... but still not fast enough to reach their levels before the financial crisis (once you adjust for inflation).
New @ONS data on wages released this morning (THREAD). The good news is that real pay growth continued to strengthen - rising to 1.7 per cent over the past year. This is the fastest growth since October 2015 (when inflation was close to zero). pic.twitter.com/FHxXyM68jT
While real pay growth is still slower in the public sector, it is now growing at almost the same rate as in the private sector (1.6% vs 1.8%). pic.twitter.com/rfYp2yxCs0
Rising real pay growth comes from both strengthening nominal earnings - which at 3.6 per cent is growing at the fastest pace since the financial crisis - and slightly slower inflation (which dipped to 1.9% last month). pic.twitter.com/SxwXnfgigJ
But the recent good news has not changed the long-term picture of a decade of poor pay growth: real weekly earnings are still 5 below the pre-crisis peak. pic.twitter.com/1UUpKn4uRy
10.39am BST
Geraint Johnes, professor of economics at Lancaster University Management School, has spotted a significant trend -- a big jump in part-term self-employed workers.
There are now 4.96 million self-employed people, an increase of 167,000 over the last year.
Following the pattern of recent months, the labour market statistics exhibit a shift towards less secure forms of employment. While the overall employment level continued to rise in the three months to May of this year, the composition of this increase is a source of some concern. The number of full-time employees fell by some 77000, and the number of part-time employees also fell slightly. There was a modest increase in the number of full-time self-employed workers, but the main source of employment growth has been part-time self-employment.
This grew by a massive 104,000 over the quarter. While many jobs of this kind offer workers the flexibility that they might want, this may come at a cost in terms of insecurity. As parts of the traditional engine room struggle in the current economic climate, workers may increasingly be turning to the gig economy.
10.32am BST
The 3.6% increase in basic earnings is partly driven by NHS pay rises, under the three-year pay deal recently agreed with the government after years of austerity.
The recent increase in the National Minimum Wage is also a factor, pushing up earnings for low-paid staff in sectors such as wholesaling, retailing, hotels and restaurants.
10.22am BST
Ed Monk, associate Director for Personal Investing at Fidelity International, is pleased to see workers getting paid more:
"The good news from today's wage data is that pay is rising by 1.4% a year in real terms, and faster for those getting bonuses.
That means households are getting richer in real terms. For the jobs market the news is more mixed. The overall numbers in work was level on last month's reading, however, indicating that job creation may be stalling."
"The labour market continues to be the UK economy's strong suit, amid ongoing uncertainty.
"High employment has provided uplift to household incomes, which has supported the economy in a particularly challenging period. However, the booming jobs market has inevitably shown signs of losing momentum in recent months. As more and more people have entered work, businesses have found it harder to fill vacancies, and skills shortages are now clearly evident across all sectors.
UK wage growth hits another post-crisis high as skill shortages bite, and there are structural reasons to suggest this trend will continue, says @SmithEconomicshttps://t.co/Y2pNv6bnat pic.twitter.com/lXIbYjTqkG
"The jobs market seems to have defied gravity, with wages rising and unemployment falling even as growth has slowed. The big question is how long can that last.
With job vacancies edging lower and firms more cautious on hiring, the pace of job creation could slow from here."
10.15am BST
A word of caution: The rise in employment may also be due to companies hiring staff rather than investing in new machinery and equipment until they know what's happening with Brexit.
10.08am BST
Employment Minister Alok Sharma says today's jobs report shows the "resilience" of the UK labour market (in the face of Brexit uncertainty, presumably).
"Wages outpacing inflation for 16 months in a row, more people in work than ever before and joint-record female employment, means better prospects for many thousands of UK families and shows the continued resilience of the UK labour market.
"With unemployment still falling, remaining at its lowest level since 1974, it's clear that UK employers continue to have confidence in our hard-working workforce.
Another set of positive #employment figures from @ons
"aTMimore people in work than ever before
ai unemployment rate at lowest since 1974
"joint record high rate of #women in employment
wages growing faster than inflation for 16th month @Conservatives delivering for #UK
With many schools breaking up this week there are some great opportunities for young people to get a taste of work over the summer - boosting their CVs as well as their bank balances as they prepare for their future careers."
10.00am BST
This chart shows how more women are in work across the UK than ever before -- partly due to changes to retirement ages.
9.52am BST
The main message from today's UK jobs report is that wage are going up, and unemployment has remained low.
Here are the key points:
9.45am BST
Economists and commentators are welcoming today's UK jobs report, especially the rise in wages:
Good last set of jobs numbers for the May/Hammond administration to bequeath to their successors - real earnings now clearly up too partly on back of rise in living wage and some NHS pay rises - highest rise in avg public sector pay since austerity programme began in June 2010... https://t.co/axJqGYUTOT
Plenty of bad news, but wage growth is back (somewhere) pic.twitter.com/wI87qjLAot
Wages, excluding bonuses, rose at fastest pace in more than a decade in three months to May. Headline rate of unemployment held steady at 3.8%, its joint-lowest since January 1975. More on @BBCNews pic.twitter.com/JyguHqL6B8
Solid numbers from the UK. Unemployment remains very low, and wages are rising.
UK unemployment (May): 3.8% vs 3.8% expected, prior 3.8%
UK average earnings ex-bonuses (May): 3.6% vs 3.5% expected, prior 3.4%
9.42am BST
However, there are also signs that the jobs boom may be fading.
Employment growth slowed in the last quarter, rising by 28,000 in the last quarter to 32.749 million. That's the slowest increase since June-August 2018.
9.41am BST
In May alone, basic pay grew by 3.8%, much faster than inflation (which was 2% in May).
Total pay, including bonuses, jumped by 3.9% during May, suggesting that workers are finally managing to drive larger pay rises out of their bosses.
9.35am BST
Breaking! Britain's unemployment rate has stuck at its lowest level since 1974, and wages growth is rising.
Average earnings, excluding bonuses, grew by 3.6% per year in the three months to May, according to the latest Labour Force survey from the Office for National Statistics.
9.29am BST
The pound has also hit a six-month low against the euro, scraping a1.1080 for the first time since January, as concerns over the Irish backstop build.
Simon Hoare, Tory chair of the Northern Ireland affairs committee says both @BorisJohnson and @Jeremy_Hunt have taken a "very very dangerous step" on the backstop.
Says it's "worrying and depressing" and he hopes "reality will dawn" @SkyNews
9.23am BST
Ricardo Evangelista, senior analyst at ActivTrades, says the threat of a disorderly Brexit this autumn is pushing the pound down.
Sterling weakness is justified by the increasing likelihood of a no deal Brexit.
Both candidates to be the next UK Prime Minister voiced their willingness to, if necessary, break away from the EU without a deal, should there be no agreement between the two parts.
9.21am BST
Brexit worries seem to be weighing on the pound again.
Sterling has lost half a cent against the US dollar this morning to $1.246, close to last week's six-month low.
Sterling struggling this morning - currently trading at daily lows:#GBP -0.28% against other currencies#GBPUSD 1.2463 -0.43%#EURGBP 0.9022 +0.31%#GBPAUD 1.77294 -0.28%#GBPJPY 134.691 -0.28%#GBPCAD 1.62715 -0.37%#GBPCHF 1.22701 -0.43%
9.19am BST
Even once Ryanair's new 737 Max planes arrive, passengers may struggle to spot them.... due to a discrete rebranding exercise.
A Boeing 737 Max due to be delivered to Ryanair has had the name Max dropped from the livery, further fuelling speculation that the manufacturer and airlines will seek to rebrand the troubled plane once it is given the all clear to fly again.
Related: Boeing 737 Max ordered by Ryanair undergoes name change
9.01am BST
Shares in soft drinks maker AG Barr have tumbled by over a quarter this morning, after it shocked the City with a profits warning.
Trading in the financial year to date has been below our expectations.
This has been exacerbated by some specific brand challenges, particularly in Rockstar energy and Rubicon juice drinks, as well as disappointing spring and early summer weather, most notably in Scotland and the north of England, and compounded further as we approach the half year when the prior year comparative weather was at its peak.
"To say this is a curve ball is an understatement. Consumer goods companies like AG Barr are supposed to be reliable compounders, with sales that turn up come rain or shine.
Unfortunately the combination of price changes and a bit more rain than shine has seen sales of Barr's soft drinks trailing behind last year's performance, and profits struggling even more.
8.36am BST
In Dublin, Ryanair shares have jumped by 1.5% in early trading to a10.30 each.
Traders may be relieved that the airline is taking action to address the Max delays, and perhaps also pleased that the damage isn't worse. At least Ryanair still expects to grow passenger numbers, if only by 3% not 7% as hoped before.
8.29am BST
Neil Wilson of Markets.com says the Boeing 737 Max crisis has "shattered" Ryanair's 2020 planning.
The airline's growth plans had been based around getting 58 of the new Max 200 jets - which are more fuel efficient than earlier models, cutting costs.
This will significantly affect passenger growth, which management says will be fall to around 3% for summer 2020 against 7% previously expected. Full year to March 2021 traffic now seen at 157m against 162m previously guided.
We may also see decline in passenger growth this year as Ryanair is planning to cut capacity ahead of the 2019 winter season in readiness.
8.08am BST
Some reaction to Ryanair's announcement:
Ryanair growth stunted by Boeing 737MAX delays. Planning on 30 such aircraft instead of 58 IF they're approved for flying later this year.
"will necessitate some base cuts and closures for summer 2020, also for winter 2019 schedule" Now negotiating with airports, staff+ unions
Cuts and changes to Ryanair's winter + summer schedules.
Its after delays in delivery of the Boeing 737 Max - the plane involved in crashes in Indonesia and Ethiopia that killed 346 people.
Ryanair says it will carry 5mn fewer people next year than it expected
More @bbc5live pic.twitter.com/2adEB2TdS6
8.02am BST
Ouch. Budget airline Ryanair has announced plans to shutter some services, after being hit by the crisis around Boeing's 737 Max plane.
This shortfall in aircraft deliveries will necessitate some base cuts and closures for summer 2020, but also for the winter 2019 schedule.
We are starting a series of discussions with our airports to determine which of Ryanair's underperforming or loss making bases should suffer these short term cuts and/or closures from November 2019.
Related: Ryanair to cut services due to Boeing 737 Max crisis
7.45am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Today we discover how Britain's labour market is faring in the face of continual Brexit uncertainty and a slowing global economy.
Should the wages rate tick up it should bode well for the British economy as workers who earn more usually spend more.
Despite the mess the Brexit process has been in throughout the year, the labor market in Britain continues to showcase a rather robust performance and today's figures should confirm that.
Economists expect job and wage growth to have picked up marginally last month while the unemployment rate probably remained steady.
Busy day of releases ahead for #markets:
- UK lab mkt report; should show mkt remaining relatively tight but BoE still likely unch for 2019
- German & E/Z ZEW surveys; momentum set to remain weak
- US retail sales; consumer remains healthy, expecting a 4th straight MoM increase