Oct 5 (Reuters) – The euro was on track for a sixth
straight daily loss against sterling on Monday, its sharpest
decline since mid-July, as concerns about France’s fiscal
outlook continued to weigh on the single currency.
Sterling edged up against a strong dollar, buoyed by the
British government’s commitment to fiscal discipline and a more
constructive approach to the European Union.
Prime Minister Andy Burnham, who campaigned to stay in the
EU in a 2016 referendum on membership, has said the nation
should again consider its options, including rejoining the bloc.
The euro slid to a 17-month low against the dollar as
concerns about France’s ability to rein in its budget deficit
stirred fears of a return of sovereign debt crisis dynamics in
the euro zone.
The single currency dropped 0.41% — the biggest decline
since July 15 — to 84.60 pence, the lowest level in
almost three months.
The pound jumped in mid-July on expectations that Burnham,
who became prime minister that month, would pick a fiscally
conservative finance minister.
Energy prices, the Middle East conflict and their impact on
the economy remained under the spotlight. Brent crude futures
fell on Monday as rising Middle East crude exports and a release
of oil stocks by the Group of Seven nations boosted supplies.
The pound has risen since early last week, as remarks by
Bank of England Governor Andrew Bailey and Deputy Governor Dave
Ramsden supported expectations for tighter monetary policy.
Analysts said markets have yet to turn their attention to
the October 28 UK budget.
“Chancellor (John) Healey faces a difficult task on October
28 but the situation on the other side of the Channel suggests
that sterling is less vulnerable to a selloff versus the euro
than it would be otherwise,” Jane Foley, senior forex strategist
at Rabobank, said.
Barclays wrote in a research note the pound was among the
key beneficiaries from the widening in French spreads last week.
In a separate European development on Monday, Spanish Prime
Minister Pedro Sanchez called a snap election in a bid to
strengthen his mandate after a fragmented parliament rejected
key government housing decrees last week amid widespread
protests.
