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Euro rises against British pound as UK fiscal outlook worries linger

EUR/GBP was around 0.8527, after a four-day run-up, amid stronger-than-expected ZEW surveys for the euro zone and uncertainty around UK fiscal flexibility.

Reported · Written up by our desk · Major Pairs

EUR/GBP climbed on Tuesday as concerns about the UK’s fiscal outlook weighed on the British pound after Andy Burnham became prime minister, according to FXStreet. The cross traded around 0.8527, extending gains for a fourth consecutive day.

OCBC strategists cited Burnham’s confirmation and the appointment of John Healey as “the chancellor of the exchange” as broadly market-friendly, but said Burnham also unsettled the gilt market by signaling he would use “any flexibility” within UK fiscal rules. FXStreet noted this reinforced investor unease over the fiscal path.

Support for the euro also came from stronger-than-expected euro zone economic sentiment data. Eurozone Economic Sentiment rose to 23.4 in July from 9.5 in June, beating forecasts of 11.2, while Germany’s Economic Sentiment Index increased to 26.3 from 10.5, above the 18 expected.

On the UK side, recent labor market data offered limited support for the pound, FXStreet reported. Employment increased by 147K in the three months to May, and the ILO unemployment rate held at 4.9%, slightly below a 5.0% forecast, with attention turning to UK CPI and PPI due Wednesday.

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