- Pound (GBP) is rising for a third day
- UK service sector sentiment plunges at the fastest pace in 2 years
- Euro (EUR) is falling amid French political uncertainty
- Barnier’s government may not survive until Christmas
The Pound Euro (GBP/EUR) exchange rate is rising for a third day. The pair rose 0.13% in the previous session, settling on Wednesday at €1.1997 and trading in a range between €1.1964 and €1.2002. At 19:00 UTC, GBP/EUR trades +0.15% at €1.2017.
The euro is trading lower as rising concerns over political uncertainty in Europe weigh on the common currency. The future of French Prime Minister Michael Barnier’s government is in question as he struggles to push through the 2025 budget amid a polarised parliament.
If a vote of no confidence motion is put forward, which he is likely to lose, the French government could collapse before Christmas, potentially even before the end of next week.
Even if he does survive, it would be by caving in to demands to soften spending cuts, which would weaken the country’s fragile public finances and hurt the economy further. Still, Barnier needs to resolve these issues, which could see France plunge into its second political crisis in six months.
This comes as political uncertainty in Germany continues, with a snap election expected early next year.
The pound is rising against the weaker euro despite data from the Confederation of British Industry showing that business sentiment in the UK’s dominant service sector fell at its fastest pace in two years.
Today’s survey showed that optimism among consumer service businesses in the UK fell -55 in November, down from -19 in August. Meanwhile, morale among professional and business services fell to -29 from 9.
Part of the deterioration in morale comes following Rachel Reeves’s budget on October 30th, which saw the new Labour government unveil measures that will see employers bear the brunt of a £25 billion tax increase. The CBI warned that businesses have been caught off guard by the size of the tax rises.
Weak sentiment can translate into weak hiring intentions and more cost pressures, which is bad news for companies and the economy.
