Pound Sterling Gains Against Euro as Paris Faces Debt and Leadership Struggles

Modified: Tuesday, 9 September 2025 17:31 BST - Written by David Woodsmith

STORY LINK Pound Sterling Gains Against Euro as Paris Faces Debt and Leadership Struggles

The Pound to Euro (GBP/EUR) exchange rate pushed higher on Tuesday after fresh political turmoil in France rattled investor confidence in the single currency.

At the time of writing, GBP/EUR was trading around €1.1541, up roughly 0.2% from Tuesday’s opening levels.

The Euro (EUR) came under pressure after French Prime Minister François Bayrou was ousted in a parliamentary confidence vote late on Monday, triggering renewed political instability in Paris.

Bayrou had attempted to push through a controversial €44 billion austerity plan, including cuts to public holidays and a freeze on government spending. However, his proposals were heavily rejected by lawmakers, with 364 votes against and just 194 in support.

The defeat forced the government’s collapse, leaving President Emmanuel Macron facing the challenge of appointing his fifth prime minister in under two years.

The renewed political uncertainty adds to existing concerns about France’s strained public finances. With debt levels already hovering around 114% of GDP, doubts are growing over whether Paris can push through the crucial 2026 budget in a fractured political climate.

Sterling, meanwhile, firmed against the Euro but showed little momentum elsewhere as UK markets faced a relatively quiet session.

Investors remained attentive to the UK bond market following last week’s volatility, though yields have since steadied, helping to calm nerves.

At the same time, traders continue to keep a cautious eye on Chancellor Rachel Reeves’s upcoming autumn budget, wary that tax rises or spending cuts could act as a drag on growth.

GBP/EUR Outlook: ECB Decision In The Spotlight

Looking ahead, the European Central Bank’s (ECB) policy announcement on Thursday is likely to provide the next major catalyst for GBP/EUR movement.

While investors broadly expect the ECB to hold interest rates steady at its September meeting, the bank’s forward guidance could set the tone for the Euro. Any signal from President Christine Lagarde that rates are already at neutral could offer the single currency some support.

However, if the ECB’s guidance leans more dovish – hinting at the possibility of further cuts down the line – the Euro may weaken, leaving room for the Pound to extend its recent gains.

In the meantime, with little in the way of new UK economic releases, Sterling’s trajectory is likely to be shaped by risk appetite and broader market sentiment.

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TAGS: Pound Euro Forecasts