The Euro (EUR) came under renewed pressure against the British Pound (GBP) on Monday, with EUR/GBP holding just above 0.8660 at the time of writing. Traders remain cautious ahead of a crucial confidence vote in France later today.
French Prime Minister François Bayrou, who leads a fragile minority government, faces a make-or-break vote in the National Assembly around 17:00 GMT, following a debate beginning at 13:00 GMT. The challenge follows Bayrou’s late-August fiscal plan, which included €44 billion in spending cuts, benefit freezes, and reduced public holidays to rein in public debt. With both far-left and far-right opposition parties committed to voting him down, defeat appears likely. Should Bayrou fall, President Emmanuel Macron would be forced either to assemble a new government from a divided parliament or call fresh legislative elections—intensifying political uncertainty in the Eurozone’s second-largest economy.
Adding to the downbeat tone, the September Sentix Investor Confidence survey showed Eurozone sentiment deteriorating sharply. The headline index dropped to -9.2 from -3.7 in August, its weakest level since April. Both current conditions and expectations declined, highlighting mounting worries about the region’s growth outlook.
Attention now turns to Thursday’s European Central Bank (ECB) meeting. Policymakers are widely expected to keep interest rates unchanged at 2%, extending their pause after a year of cuts. With inflation inching up to 2.1% and recent growth indicators showing resilience, urgency for further easing has eased. ECB board member Isabel Schnabel has already cautioned against complacency, pointing to lingering risks from tariffs and trade disruptions. Traders will closely parse President Christine Lagarde’s remarks for any hint of whether more rate cuts remain possible later this year.
Meanwhile in the UK, Sterling stays supported by expectations of a prolonged Bank of England (BoE) hold. Major lenders including HSBC and Deutsche Bank now see BoE rate cuts delayed until 2026, citing sticky inflation. However, fresh BoE survey data showed British firms are cutting jobs at the fastest pace since 2021, underscoring a slowdown in growth. The combination of stubborn price pressures and weakening employment leaves the BoE in a difficult position—but its comparatively tighter stance versus the ECB is helping to cap EUR/GBP’s upside and keep the Euro under pressure.
