Pound to Euro Hits Best Exchange Rate in 16 Months as French Debt Fears Grow

Modified: Monday, 12 October 2026 20:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Hits Best Exchange Rate in 16 Months as French Debt Fears Grow

The Pound to Euro (GBP/EUR) exchange rate got off to a positive start this week, with the pairing climbing to a fresh 16-month high.

At the time of writing, GBP/EUR was trading at approximately €1.1833, marking a gain of around 0.2% since the start of Monday's session.

Fresh concerns over France's precarious fiscal position continued to drag on the Euro (EUR) on Monday, with investors turning their attention to an upcoming parliamentary debate on the government's latest budget proposals.

Plans for France's 2027 budget face considerable resistance in a fractured National Assembly.

While the government is seeking to narrow the deficit, proposed spending reductions and tax measures have encountered opposition, casting doubt over whether ministers can secure sufficient backing.

Investor unease has already driven French borrowing costs higher.

The gap between yields on French government bonds and their German counterparts has widened to its largest level since the Eurozone sovereign debt crisis of 2011-12.

Further political deadlock could deepen concerns about the government's ability to deliver meaningful fiscal reforms.

There are also fears that prolonged instability could spill over into other Eurozone bond markets, adding to the headwinds facing the single currency.

Hopes of a thaw in relations between the UK and European Union offered Sterling some support at the start of the week, despite a relatively quiet domestic data calendar.

Optimism grew following a BBC report that Prime Minister Andy Burnham is expected to tell parliament that rejecting closer ties with the EU would amount to a 'dereliction of duty'.

His comments come as the government pursues negotiations with Brussels ahead of a planned UK-EU summit on 20 November.

For Sterling investors, the prospect of closer economic cooperation represents a potential positive.

However, gains may prove limited if any agreement falls short of substantial economic integration, leaving traders cautious about how much progress can realistically be achieved.

Near-Term GBP/EUR Forecast: French Budget Debate to Keep Euro Under Pressure?

Developments in France are likely to remain a major driver of the Pound to Euro exchange rate during the first half of the week, particularly as lawmakers begin debating the government's budget on Tuesday.

Renewed political friction or signs that proposed fiscal measures are unlikely to pass could place further pressure on the single currency, potentially allowing GBP/EUR to extend its recent advance.

On the UK side, attention will turn to comments from Bank of England (BoE) policymaker Swati Dhingra.

Should she reiterate her dovish stance on monetary policy, expectations for an interest rate hike in November could be dampened, potentially undermining demand for Sterling.

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TAGS: Pound Euro Forecasts