"Barnier's political Waterloo could trigger a chain reaction across the markets"

Barnier's political Waterloo could trigger a chain reaction across the markets. This instability and a looming budget crisis have put significant downward pressure on the euro and caused bond yields to spike. As the eurozone's second-largest economy, the currency faces its most serious challenge since the sovereign debt crisis as France descends into political chaos. The euro has already sharply depreciated against the pound and shows no signs of abating, so the euro could test new lows in the coming days. A breach of the 0.82 level is not out of the question, potentially pushing the exchange rate towards 0.80 in the following weeks. This would mark a significant milestone, representing a level not seen since the aftermath of the Brexit referendum. For Britons, the strengthening pound will translate into welcome savings for those embarking on festive breaks across Europe.

Political upheaval breeds instability, and the markets detest the unpredictable nature of situations like this. With France being a main trading partner of the UK despite Brexit, any disruption there will speed up the expected rises in inflation and keep mortgage rates higher for even longer.