The Pound-Euro could extend its advance if German factory orders disappoint, while mounting French debt concerns may keep the Euro under pressure.
The Pound to Euro (GBP/EUR) exchange rate soared to a one-year high on Monday amid a mounting debt crisis in France.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1804. Up around 0.3% from the start of Monday’s session.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.1804 (+0.30%)
DAILY RECAP:
The Euro (EUR) collapsed to fresh multi-month lows on Monday as mounting concerns over France’s ballooning debt pile began to weigh more heavily on sentiment towards the single currency.
A sharp sell-off in French government bonds last week pushed the premium investors demand to hold French debt over German Bunds to around 150 basis points – the widest spread since the height of the Eurozone sovereign debt crisis in 2011.
Compounding concerns over France’s ability to rein in its deficit is the country’s deeply divided parliament, which makes is extremely unlikely that the minority government will be able to pass its proposed 2027 budget aimed at reducing spending by €54bn.
The deterioration in French bond markets has also raised concerns that the country’s fiscal problems could spill over into the wider Eurozone.
Italian and Belgian borrowing spreads have also widened in recent weeks, suggesting investors are becoming increasingly cautious towards European sovereign debt more broadly. This has revived memories of the Eurozone debt crisis and created an additional headwind for the single currency.
While able to rally against the Euro on Monday, the Pound (GBP) struggled to replicate this success against its other peers, trading broadly lower in early trade.
Sterling struggled amid the lack of a clear domestic catalyst, with investors left to focus instead on wider market trends.
This left the Pound vulnerable amid the broadly risk-off market mood which prevailed through the start of the European session.
Near-Term GBP/EUR Forecast: Soft German Industrial Data to Accelerate Euro Sell-Off?
Looking ahead, the next catalyst for the Pound Euro exchange rate on Tuesday is likely to be Germany’s latest factory orders data.
August’s data may reinforce the EUR selling bias as it is expected to report a contraction in order growth, raising fresh concerns about the economic trajectory of the Eurozone’s largest economy.
Meanwhile, in the continued absence of any notable UK macroeconomic data, movement in the Pound may continue to be driven by wider currency trends.
Our currency coverage draws on live market data, official economic releases and published bank research.
