The Pound-Euro rate could remain above €1.19 if French fiscal concerns persist, although weaker UK retail sales and services activity may test Sterling.
The Pound to Euro (GBP/EUR) exchange rate continued to press higher on Thursday amid ongoing concerns over France’s fiscal outlook.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1934. A modest increase from the start of Thursday’s session.
Pound to Euro (GBP/EUR): 1.193508 (+0.10%)
Euro to Dollar (EUR/USD): 1.121202 (-0.20%)
DAILY RECAP:
The Euro (EUR) continued to drift lower on Thursday as France’s escalating fiscal and political turmoil weighed on sentiment towards the single currency.
French 10-year government bond yields breached 5% on Wednesday for the first time since 2002, reflecting growing investor concerns over the government’s ability to stabilise the country’s public finances.
Lacking a majority in parliament, Prime Minister Sébastien Lecornu is struggling to secure approval for a budget designed to rein in France’s sizeable deficit, amid considerable opposition to its proposed spending cut and tax hikes.
These concerns are compounded by ongoing civil unrest, with the country bracing for more potential violence at protests this weekend.
The Pound (GBP) ticked broadly higher on Thursday after Chancellor John Healey signalled that supporting British entrepreneurs and easing the pressures facing businesses would be key priorities in his upcoming budget.
In an interview with the Times, Healey acknowledged that businesses had faced considerable challenges from rising operating costs, higher taxes and regulatory burdens, and hinted that the government is looking at ways to alleviate some of the cost pressures on firms.
The prospect of a more business-friendly fiscal approach from the Chancellor was well received by GBP investors, who hope this will translate into more investment and stronger growth in the UK economy.
Near-Term GBP/EUR Forecast: Slowdown in Consumer Spending to Sink Sterling?
Looking ahead to the end of this week’s session, the recent upside in the Pound Euro exchange rate could be tested if data shows that UK consumers are tightening their belts.
The UK’s latest retail sales figures are expected to report a contraction in sales growth last month, while October’s preliminary PMIs are forecast to show a further moderation of activity across the vital services sector.
Signs that consumer spending is slowing are likely to sap Sterling sentiment as it could weaken the case for the Bank of England (BoE) to hike aggressively in the coming months.
Meanwhile, the Eurozone’s own PMI data could offer some much-needed respite for the Euro if they report that activity in the bloc’s private sector remained resilient this month.
Our currency coverage draws on live market data, official economic releases and published bank research.
