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'French are in for a Gallic version of a Greek tragedy' as political crisis puts pressure on Euro

ended 03. December 2024

The Euro is under pressure given the political crisis unfolding in France, while yields on Government bonds spiked. Newspage asked experts how low could it go against the Pound in your view, how serious are the events that are unfolding and to what extent could Sterling's strength against the Euro benefit anyone heading off to the Alps or a city break in Europe this Christmas. Their views can be found below.

3 responses from the Newspage community

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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
I am afraid the French are in for a Gallic version of a Greek tragedy. Last week, French bond yields already hit Greek cost levels and their widest margin against German bunds since 2012. The ‘no-confidence’ vote against PM Michel Barnier could come as soon as tomorrow. The euro is already trading close to its lowest level against the pound sterling since April 2022. Its low for 2024 was reached on 11 November. It’s unlikely Barnier will survive the ‘no-confidence’ vote, and this could see the euro sink lower, hitting levels not seen against the pound since before the Brexit vote of June 2016. For travellers heading to the Alps or on city breaks in Europe this Christmas, a stronger pound means more purchasing power, making trips more affordable. The current exchange rate dynamics should benefit those looking to enjoy winter holidays of any type on the continent.
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Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
As political turmoil unfolds, the tremors of France's political earthquake are reverberating across Europe, and sterling is emerging as a beneficiary. With Barnier's government on the verge of collapse, 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 is facing its most serious challenge since the sovereign debt crisis while France teeters on the brink of political chaos. Consequently, the euro has already sharply depreciated against the pound and shows no signs of abating given the gravity of the situation, so we could see the euro 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 coming weeks. However, for Britons planning their winter getaways, the strengthening pound will translate into welcome savings for those embarking on festive breaks across Europe.
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Prem Raja
Head of Trading Floor at Currencies 4 You
The recent developments in the French government, with a vote of no confidence pending, have added to the political uncertainty in Europe, following the collapse of the German government last month. Currently, the GBPEUR exchange rate is still comfortably over the 1.20 handle, and with further instability on the horizon for both the French and German governments, I expect the GBPEUR exchange rate to remain at these higher levels—potentially breaking through 1.21 before exploring the possibility of anything higher. The reality is that these political issues will be resolved, but the uncertainty alone will be enough to keep the euro weak for the time being, and will give the ECB much to consider in their interest rate announcement this month. For those looking to purchase euros, any exchange rate above 1.20 is a great level to buy at compared to the average GBPEUR rates over the last couple of years.