EUR/GBP extended its decline for a second session on Wednesday, trading near 0.8650 in Asia. The Pound Sterling (GBP) advanced after British Retail Consortium (BRC) Like-For-Like Retail Sales rose in August, marking the strongest increase in four months. Despite the improvement, the BRC highlighted that retailers remain pressured by high borrowing costs, energy expenses, and uncertainty ahead of the government’s November budget.
Policy outlook: BOE and ECB in focus
UK finance minister Rachel Reeves called on the government to support the Bank of England (BoE) in bringing inflation lower while fostering growth. She also confirmed November 26 as the date for her annual budget. Across the channel, markets expect the European Central Bank (ECB) to keep rates unchanged for a second consecutive meeting on Thursday, as growth stabilizes and inflation remains close to target.
Political instability in France
In France, parliament voted to oust Prime Minister François Bayrou on Monday over disagreements on budget cuts aimed at curbing rising national debt. The political turmoil forces President Emmanuel Macron to appoint the country’s fifth prime minister in less than two years, adding to uncertainty within the euro area.
Geopolitical tensions rise in Europe
Poland activated its own and NATO’s air defenses early Wednesday to intercept drones that entered its airspace during a Russian strike on Ukraine. Kyiv also reported a suspected Russian drone incursion into Polish territory, signaling a breach of NATO airspace and heightening regional security risks.
