Market Overview

The EUR/GBP currency pair saw a slight increase, hovering around 0.8705 early on Monday in Europe. The British pound (GBP) weakened against the euro (EUR) amid rising concerns over potential tax increases that could come in the forthcoming autumn budget. Traders are awaiting the UK jobs report, which is set to release later on Tuesday, hoping it might provide new insights.

Analysts are predicting that Britain’s Chancellor of the Exchequer, Rachel Reeves, will likely implement tax hikes in her autumn statement, aimed at meeting fiscal targets due by late November. If these tax increases materialize, they could negatively affect economic growth in the UK and dampen household sentiment, increasing pressure on the pound and potentially benefiting cross-traders.

“While the focus is on the autumn 2025 budget, we maintain a bearish outlook on the pound given the anticipated weaker growth,” noted an analyst from J. Safra Sarasin Bank.

In France, President Emmanuel Macron has formed a new government following a lengthy discussion with the reappointed Prime Minister, Sébastien Lecorne. This meeting takes place just ahead of the upcoming budget submission deadline to parliament. Investor confidence appears to be rising after Lecorne indicated that a snap general election is unlikely due to the current parliament’s dissolution, leading to a stronger euro against the pound.

Christine Lagarde, President of the European Central Bank (ECB), expressed confidence that France would submit its budget on time to fulfill international obligations. However, emerging signs of political uncertainty could pose short-term risks for the euro.