- Pound (GBP) is falling after gains last week
- UK house prices stall amid uncertainty ahead of the Budget
- Euro (EUR) rises amid political stability in France
- The S&P Global cut France’s credit rating to A+
The Pound-Euro (GBP/EUR) exchange rate is falling after gains last week. The pair rose 0.23% in the previous week, settling on Friday at €1.1523. It traded between €1.1459 and €1.1544. At 16:00 UTC, GBP/EUR trades -0.09% at €1.1511.
The pound is under pressure at the start of any week as investors await UK inflation data, retail sales, and government borrowing data in a busy week for the economic calendar
This morning, figures from Rightmove showed that the UK housing market barely moved in what is typically a busy autumn sales period, adding to growing signs of uncertainty in the housing market ahead of the chancellor’s budget at the end of November.
Average asking prices rose 0.3% in the four weeks to October 11th, well below the average 1.1% for this time of year. Usually, at this time of year, the housing market picks up before the Christmas lull.
However, the Chancellor’s budget will not be delivered until the end of November, which is notably late, creating significant uncertainty ahead of expected tax hikes.
Attention will also be on government borrowing data tomorrow after the September figure was significantly higher than expected, keeping investors nervous ahead of the budget.
The EUR is rising, boosted by signs of some political stability in France, although French bonds remain under pressure following a surprise French credit downgrade by S&P Global. The S&P Global downgraded the nation’s sovereign credit score from its AA rating to A+.
The downgrade means France had lost its AA rating at two of the three major credit assessors in less than a month as the reappointed Prime Minister Sebastian Lecornu looks to push a budget through a divided National Assembly.
Lecornu managed to survive the votes of no confidence last week, but only after giving in to demands for suspension of Macron’s pension reforms, which would have boosted public finances.
This is a reminder that while the situation has improved in France, it’s still fragile and could limit upside in the EUR.