Pound to Euro: GBP Rises as French Borrowing Costs Surge

Modified: Thursday, 22 October 2026 20:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro: GBP Rises as French Borrowing Costs Surge

The Pound to Euro (GBP/EUR) exchange rate extended its recent gains on Thursday, with mounting concerns about France's public finances continuing to weigh on the single currency.

At the time of writing, GBP/EUR was trading at approximately €1.1928, edging higher during the session and remaining within reach of the €1.2000 level.

The Euro (EUR) remained under pressure on Thursday as France's worsening fiscal position and uncertain political outlook continued to unsettle investors.

French 10-year government bond yields climbed to a fresh 24-year high, reflecting growing doubts about the government's ability to bring the country's substantial deficit under control.

The increase in borrowing costs suggests investors are demanding greater compensation for holding French government debt, adding to concerns about the sustainability of the country's finances.

Prime Minister Sébastien Lecornu faces considerable opposition as he attempts to secure parliamentary backing for a budget designed to reduce the deficit.

Without a parliamentary majority, the government has struggled to build support for proposed spending reductions and tax increases, raising questions about whether meaningful fiscal consolidation can be achieved.

The political situation has been complicated further by continued civil unrest.

The prospect of additional demonstrations and violence over the weekend has added to uncertainty surrounding France's economic outlook, leaving Euro investors wary of further deterioration.

Concerns about the potential impact on other Eurozone bond markets have also contributed to the single currency's weakness, allowing GBP/EUR to extend its recent advance.

The Pound (GBP), meanwhile, found some support on Thursday after Chancellor John Healey signalled that measures to encourage entrepreneurship and reduce the burden on British businesses could feature prominently in his forthcoming Autumn Budget.

Speaking to The Times, Healey acknowledged the pressures facing companies from rising operating costs, taxation and regulatory requirements.

His remarks suggested that the government is considering ways to ease some of these difficulties while encouraging private-sector investment.

The prospect of a more business-friendly fiscal approach offered some encouragement to Sterling investors, particularly given concerns that elevated borrowing costs and persistent inflation could undermine UK economic growth.

Measures that improve business confidence and encourage investment could provide longer-term support for productivity and economic activity.

However, the Pound's gains remained relatively modest as markets awaited fresh evidence of how the UK economy is performing.

Near-Term GBP/EUR Forecast: Weak UK Retail Sales Could Test Sterling's Rally

The Pound to Euro exchange rate is approaching the psychologically important €1.2000 level, but upcoming UK economic releases could determine whether Sterling has sufficient momentum to extend its gains.

Attention will turn to September's retail sales figures and October's preliminary purchasing managers' index (PMI) surveys.

Economists expect consumer spending to have weakened, while activity across the UK's dominant services sector is forecast to have slowed further.

Disappointing readings could raise concerns that higher household costs and elevated interest rates are beginning to weigh more heavily on domestic demand.

Such an outcome could temper expectations for further Bank of England (BoE) monetary tightening, potentially encouraging some profit-taking following Sterling's recent advance.

Conversely, stronger-than-expected figures would provide reassurance about the UK economy's resilience and could help GBP/EUR challenge the €1.1950 area.

A sustained move above this level would bring €1.2000 into sharper focus.

For the Euro, the latest Eurozone PMI figures will also be closely watched.

Evidence that private-sector activity is holding up better than expected could offer the single currency some support.

Nevertheless, continued uncertainty surrounding France's budget negotiations and rising government borrowing costs may limit the scope for a sustained Euro recovery.

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