- Pound (GBP) is rising for a third day
- Gains could be limited amid Budget worries
- Euro (EUR) falls amid ongoing political worries in France
- German industrial production falls by the most in 3 years
The Pound-Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair gained 0.02% in the previous session, settling on Tuesday at €1.1517. It traded between €1.1486 and €1.1526. At 10:00 UTC, GBP/EUR trades 0.24% at €1.1544.
The euro is falling for a third straight day, due to ongoing political uncertainty in France, and after weak German economic data.
With no government in place and a hard deadline of October 13th for presenting the budget to parliament, the outlook for France is looking shaky. Outgoing Prime Minister Sebastian Lecornu continued final negotiations and a last attempt to form a government and secure a budget.
A draft Finance Bill must be tabled in the National Assembly by October 13th to clear it for 2026. Whilst Lecornu noted that there have been points of convergence which could reduce the likelihood of dissolution, the situation remains fragile.
Meanwhile, German industrial production posted its biggest decline in more than three years. Industrial output fell by 4.3% month on month in August, well below expectations of a 1% rise.
Production in Germany’s largest industrial branch, the automotive industry, declined by 18.5% month-on-month due to a combination of annual plant closures, production changeovers, and a slowdown in demand from Germany’s top trading partner, the US, following months of buying ahead of tariffs.
Meanwhile, the EU announced that it will implement steel import quotas and apply a 50% tariff on imports exceeding the new, smaller quota, as a move to protect the steel markets. This is more evident in the stock market than in the euro currency.
The pound is rising against the euro, but gains are likely to be limited as investors continue to look towards next month’s budget.
Chancellor Rachel Reeves is widely expected to raise taxes further in order to balance the books. This could further slow already stagnant growth. Recent PMI data has highlighted fading momentum and confidence in the UK economy
The UK economic calendar is quiet; attention will be on the Bank of England’s official Hue Pill speaking today, and Catherine Man will speak tomorrow.
