Pound-Euro could test €1.19 if French political and fiscal tensions persist, although weaker UK jobs data may limit Sterling’s upside.
The Pound to Euro (GBP/EUR) exchange rate rallied on Monday, after France was rocked by violent protests over the weekend.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1891. Up around 0.3% from the start of Monday’s session.
Pound to Euro (GBP/EUR): 1.186886 (+0.07%)
Euro to Dollar (EUR/USD): 1.121592 (-0.21%)
DAILY RECAP:
The Euro (EUR) faced renewed selling pressure on Monday as a wave of civil unrest across France over the weekend exacerbated concerns about the country’s deteriorating fiscal position and added to uncertainty surrounding its political outlook.
The unrest, which saw clashes with police, widespread looting and a fire that severely damaged the historic town hall in Limoges, has placed further pressure on President Emmanuel Macron’s government.
The demonstrations come at an already difficult time for French policymakers, who are struggling to secure support for a 2027 budget aimed at reducing the country’s sizeable deficit ahead of next year’s presidential election.
The prospect of further political instability has raised doubts over whether the government can implement the spending reductions and fiscal reforms needed to restore confidence in France’s public finances.
These fears have added to France’s bond-market woes, which EUR investors are growing increasingly concerned could spill over into the wider Eurozone.
While able to advance against the Euro, the Pound (GBP) was largely rangebound against its other peers on Monday ahead of a run of key UK data.
A heavy macroeconomic calendar is anchored by the latest domestic labour market and consumer price figures, followed later in the week by retail sales numbers and flash PMIs.
Traders will scour the upcoming prints for fresh clues on how domestic activity is weathering the recent climb in energy costs, and whether stubborn price pressures will force the Bank of England (BoE) to tighten monetary policy more aggressively.
Near-Term GBP/EUR Forecast: Weak UK Jobs Data to Drag on Sterling?
Looking ahead, the Pound Euro exchange rate may take its cues primarily from the UK’s latest jobs figures on Tuesday.
Consensus forecasts point to another uptick in the unemployment rate for August alongside a cooling in wage growth. If confirmed, signs of domestic labour market slack could sap Sterling demand by tempering expectations of future interest rate hikes from the BoE.
In the meantime, it seems safe to assume that France’s political and fiscal headaches will continue to influence EUR sentiment, with headwinds against the Euro only likely to grow if the situation deteriorates further.
Our currency coverage draws on live market data, official economic releases and published bank research.
