The Euro strengthened against the British Pound on Monday, with EUR/GBP recovering to around 0.8742 after briefly dipping to a one-week low earlier in the session. The cross gained traction as Sterling remained under pressure from ongoing UK fiscal concerns, while slightly dovish remarks from Bank of England (BoE) Deputy Governor Dave Ramsden added to the drag.
BoE signals gradual approach
BoE Deputy Governor Dave Ramsden said at a European Central Bank conference that there is “scope for further removal of policy restraint” but emphasized that a “gradual and careful approach on rates is appropriate.” He noted that the UK labour market “continues to loosen, with wage growth normalising” and that wage settlements are broadly in line with pay surveys.
Ramsden added that while headline inflation may “rise slightly further before peaking,” he is confident that inflation will return to target and sees risks to the outlook as balanced.
UK fiscal policy remains a headwind
Chancellor Rachel Reeves reiterated her commitment not to raise VAT, income tax, or National Insurance during the current Parliament, aiming to reassure households and businesses amid speculation of potential tax hikes. She did not rule out other revenue-raising measures, highlighting the need for “economic discipline” in light of elevated borrowing costs and persistent budget pressures.
Eurozone sentiment And upcoming data
On the Euro side, sentiment data showed a mixed but steady picture. The European Commission’s Business Climate Index fell to -0.76 in September from -0.72 in August, Consumer Confidence held at -14.9, and the Economic Sentiment Indicator edged up to 95.5 from 95.3.
Looking ahead, market attention will turn to the flash September inflation data across the Eurozone, with national readings from Germany, France, and Italy due on Tuesday, and the bloc-wide figure on Wednesday. Preliminary Spanish data released on Monday showed a slight rise in annual inflation, though monthly prices declined.
In the UK, focus will shift to final Q2 Gross Domestic Product (GDP) data due on Tuesday.
