EUR/GBP edges lower as France confidence vote puts Euro under pressure

The Euro (EUR) is trading under pressure against the British Pound (GBP) on Monday, with EUR/GBP hovering above 0.8660 at the time of writing. The cross remains subdued as traders adopt a wait-and-see stance ahead of a crucial confidence vote in France later on the day.

France faces a critical vote of confidence for Prime Minister François Bayrou, who leads a minority government with no stable majority in the National Assembly. The vote is set to take place later on Monday, around 17:00 GMT, following a debate that begins at 13:00 GMT. It comes after Bayrou outlined a fiscal plan in late August aimed at curbing public debt through €44 billion in spending cuts, along with freezes on benefits and public holidays.

Opposition parties from both the far-left and far-right have already committed to voting the government down, making Bayrou’s defeat likely. If he loses, President Macron must form a new government from the same divided parliament or consider calling new legislative elections, adding fuel to political uncertainty in the Eurozone’s second-largest economy.

Adding to the cautious tone, the latest Sentix Investor Confidence survey showed sentiment across the Eurozone slumping in September. The headline index fell sharply to -9.2 from -3.7 in August, its lowest since April. Both the current situation and expectations components weakened, reflecting mounting concerns over growth prospects across the bloc.

Looking ahead, attention will shift to Thursday’s European Central Bank (ECB) policy decision. The ECB is expected to leave interest rates unchanged at 2%, extending its pause after a year-long easing cycle. Recent data showing Eurozone inflation edging up to 2.1% and signs of resilience in growth have reduced the urgency for further cuts. Policymakers, including board member Isabel Schnabel, have stressed caution, warning of lingering upside risks from tariffs and trade disruptions. Traders will closely watch President Christine Lagarde’s comments for clues on whether additional easing remains on the table later this year.

On the UK side, Sterling remains supported by expectations that the Bank of England (BoE) will stay cautious on easing. Major banks such as HSBC and Deutsche Bank have pushed back their forecasts for BoE rate cuts into 2026, citing persistent inflation pressures. At the same time, a BoE survey showed British firms are cutting jobs at the fastest pace since 2021, underscoring a weakening growth backdrop. The combination of sticky inflation and slowing employment leaves the BoE in a difficult position, but its relatively tighter stance compared with the ECB, which is expected to hold rates steady this week, is helping to keep EUR/GBP contained and curbing the Euro’s upside.