The EUR/GBP cross extends gains to around 0.8735 in early European trading on Tuesday, supported by broad Sterling weakness as UK fiscal concerns resurface. Traders now turn their focus to the release of September’s preliminary Purchasing Managers’ Index (PMI) figures from both the Eurozone and the UK, scheduled for later in the day.
UK borrowing surge pressures the pound
Fresh data from the UK’s public finances revealed that net government borrowing rose to £18 billion in August, the highest level for the month in five years and well above expectations of £12.8 billion. The sharp increase in borrowing underscores mounting fiscal challenges and adds to concerns over the sustainability of Britain’s debt levels. Analysts note that this deterioration in fiscal discipline could weigh further on GBP, providing tailwinds for EUR/GBP.
Eurozone sentiment offers modest support to EUR
The shared currency also found support from stronger-than-expected consumer confidence data. Eurozone Consumer Confidence rose to -14.9 in September, improving from -15.5 in August and beating forecasts of -15.3. The improvement highlights resilience in household sentiment, offering a slight boost to the euro ahead of Tuesday’s PMI releases.
Geopolitical risks temper euro upside
Despite the improved data, geopolitical tensions remain a potential drag on the euro. Rising friction between Russia and Europe has reignited concerns over security and energy supply risks. EU foreign policy chief Kaja Kallas said Russian military aircraft violated European airspace three times in two weeks, emphasizing that EU members have the right to defend their sovereignty. Moscow denied the allegations, dismissing them as unfounded and politically motivated, according to Reuters.
