Sterling climbs to 17-month high against euro as France unrest pressures single currency
Britain's currency strengthens at the start of the week as pressure on the euro combines with firmer sentiment toward the UK outlook. The move comes after stronger-than-expected August economic data and as investors weigh energy costs, fiscal credibility and the Bank of England's policy path.
Highlights
- Sterling climbs 0.25% to 84.11 pence per euro, its highest since May 2025, amid France unrest weighing on the euro.
- The pound slips 0.05% to $1.3327 as a stronger U.S. dollar and concerns about the UK economy persist despite stronger-than-expected August growth.
- HSBC highlights potential downside for sterling ahead of the October 28 budget, with market caution linked to UK fiscal measures and government credibility.
Currency moves and policy signals
As reported by Reuters, sterling rises 0.25% to 84.11 pence per euro on Monday after earlier touching 83.95 pence, its strongest level since May 2025. Against the U.S. dollar, the pound slips 0.05% to $1.3327 as the greenback broadly strengthens.Views on the Bank of England's interest-rate path remain mixed after data last week show Britain's economy grows more strongly than expected in August. HSBC analysts say sterling against the U.S. dollar is likely to move lower because a hawkish Federal Reserve contrasts with what they describe as a still vulnerable UK economy and a reluctant Bank of England.
BoE Governor Andrew Bailey says soaring energy prices so far appear to have only limited wider effects on British prices, though he adds it is too soon to draw firm conclusions about the strength of second-round effects. Commerzbank says the economy's resilience could give the central bank room to raise rates without putting undue pressure on growth.
Fiscal credibility and market risks
Confidence that the British government can deliver growth without abandoning fiscal discipline supports the pound, adding to the currency's recent gains against the euro. At the same time, unrest in France and elevated energy prices weigh on the single currency.Still, recent market turmoil elsewhere suggests investors remain cautious about becoming complacent on UK assets. HSBC says the October 28 budget adds further downside risks, and investors may avoid long sterling positions until fiscal measures, gilt yields and the government's credibility are more fully assessed.
In our earlier coverage of Chancellor John Healey’s pre-Budget fiscal stance, we noted his commitment to sticking with deficit-reduction plans ahead of the October 28 Budget as the government tries to pair discipline with growth support. The article also highlighted August GDP rising 0.1% and the growing political pressure around potential tax and reform choices that could shape investor confidence in UK assets.
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