Euro Falls to Three-Month Low Against Pound Amid France Fiscal Worries

The euro fell to its lowest level in nearly three months against the pound on Monday, marking its sixth consecutive daily decline. The drop, the steepest since mid-July, was driven by growing concerns over France's fiscal stability, which raised fears of a resurgence in euro zone sovereign debt crises. The single currency slipped 0.41% to 84.60 pence, while the pound gained strength against a robust dollar, supported by the UK government's focus on fiscal discipline and a more positive stance toward the European Union.

Prime Minister Andy Burnham, a former EU membership advocate, has suggested revisiting the UK's relationship with the bloc, including potential re-entry. Meanwhile, the euro also hit a 17-month low against the dollar amid worries about France's ability to control its budget deficit. The pound had previously surged in mid-July on expectations that Burnham would appoint a fiscally conservative finance minister.

Market attention remains on energy prices and the Middle East conflict, though Brent crude futures fell on Monday due to increased oil supplies. The pound's recent rise was also fueled by comments from Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden, which reinforced expectations of tighter monetary policy. Analysts note that the UK's October 28 budget will be critical, but the pound may be less vulnerable to a selloff against the euro due to France's fiscal challenges.

Barclays highlighted that the pound benefited from the widening of French bond spreads last week. Additionally, Spanish Prime Minister Pedro Sanchez announced a snap election on Monday, aiming to strengthen his mandate after parliamentary setbacks.