- Pound (GBP) is falling after losses last week
- Fiscal concerns loom
- Euro (EUR) is rising despite French political uncertainty
- ECB rate decision is on Thursday
The Pound-Euro (GBP/EUR) exchange rate is edging lower, extending losses from last week. The pair fell 0.24% in the previous session, settling on Friday at €1.1528. It traded between €1.1475 and €1.1580. At 10:30 UTC, GBP/EUR trades -0.05% at €1.1523.
The pound is struggling to gain traction amid ongoing UK fiscal and bond market concerns, which have dragged sterling to near a one-month low.
Last week, following Prime Minister Keir Starmer’s mini reshuffle in Downing Street, UK gilt yields rose to the highest level in 27 years. The jump came amid concerns over the UK government’s fiscal credibility and due to rising speculation surrounding tax hikes and Chancellor Rachel Reeves’ upcoming autumn budget. Bond turbulence has calmed since, but will remain on investors’ radar.
Last week’s data was mixed, with services PMIs beating expectations. However, weak UK retail sales data on Friday highlighted softness in consumption.
Looking out across the week, the UK economic calendar is quieter with attention on Friday’s GDP reading.
The euro is holding up despite a vote of confidence in France, which could limit the upside. French Prime Minister Bayrou is facing a vote of no confidence today on his 2026 budget, which aims to reduce Frances 5% 5% GDP budget deficit.
Bayrou is not expected to win the vote, which means France may be looking for its 5th Prime Minister in three years.
It remains unclear whether President Macron would try to appoint another Prime Minister or call for fresh parliamentary elections. Ongoing political uncertainty in the eurozone’s second-largest economy could limit gains.
Looking out across the week, the other main focus will be Thursday’s ECB interest rate decision, when the central bank is expected to leave interest rates unchanged for a second straight meeting at 2%.
With inflation in the region around 2% the ECB can maintain a wait-and-see mode for now, although another rate cut could happen before the end of the year.