Pound to Euro Rate: GBP Rises as Rallying USD, French Political Fears Weigh on EUR

December 3, 2024 - Written by John Cameron

STORY LINK Pound to Euro Rate: GBP Rises as Rallying USD, French Political Fears Weigh on EUR

The Pound to Euro exchange rate (GBP/EUR) rose on Monday as a climbing US Dollar (USD) and French political instability dented the Euro.

The Euro came under significant pressure at the start of the week, due to the single currency’s negative correlation with a rallying US Dollar.

USD strengthened following remarks by President-Elect Donald Trump, who proposed imposing a 100% tariff on BRICS nations if they introduced a rival to the US Dollar as the global reserve currency. This bolstered USD’s appeal, exerting downward pressure on the Euro.

Adding to the Euro’s woes, political uncertainty in France heightened market concerns. French Prime Minister Michel Barnier faced the threat of a no-confidence vote after unveiling an austerity budget that provoked backlash from opposition parties.

With his minority government reliant on precarious alliances in a deeply divided National Assembly, the proposed budget – which seeks to tackle France’s deficit – drew criticism from both left- and right-wing factions.

The prospect of heightened political instability in France, the Eurozone’s second-largest economy, compounded the single currency’s struggles, dragging it lower at the start of the week.

The Pound (GBP) found support on Monday, buoyed by a surprising acceleration in UK house price growth.

In November, house price growth climbed to its fastest pace in two years, catching markets off guard. This robust performance defied expectations, given the challenges posed by high interest rates and pressure on household budgets.

The data suggests that strong income growth is helping to sustain demand in the housing market, providing unexpected resilience and boosting the Pound’s appeal.

Pound Euro Exchange Rate Forecast: PMIs and Central Bank Speeches to Impact Pairing?

The Pound Euro exchange rate may be subdued on Tuesday due to an absence of notable UK and Eurozone economic data.

However, Wednesday could bring increased volatility as markets react to the final services PMI reports for both currencies. Eurozone services activity is expected to contract, while UK activity is forecast to stagnate. This divergence could support GBP/EUR, although both currencies may encounter broader headwinds.

Speeches from key central bank figures are also in focus. Bank of England (BoE) Governor Andrew Bailey is set to speak, and if he downplays the likelihood of an imminent interest rate cut, the Pound could gain.

Meanwhile, European Central Bank (ECB) President Christine Lagarde is also scheduled to address markets. Any dovish remarks from Lagarde could apply additional pressure to the Euro.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts