The Euro continues to face pressure due to ongoing fiscal and political concerns in France, which have contributed to a persistent risk premium and a challenging environment for Euro bulls. ING’s Francesco Pesole notes that EUR/USD is currently around 1.5% undervalued relative to short-term fundamentals, reflecting a moderate build-up in France-related risk that could expand further if French bonds continue to lose value. ING has revised its EUR/USD forecast lower to 1.13 for the fourth quarter of 2026 and first quarter of 2027, with a possible test of 1.110 seen as a risk in the near term [1].
On the EUR/GBP front, the cross reversed earlier gains on Tuesday, trading around 0.8445, near its lowest level since June 2025, as Euro weakness persisted despite a deeply oversold RSI. ING analysts have also lowered their EUR/GBP forecast, now expecting the pair to trade in a 0.84-0.85 range for at least several more months. They cite ongoing idiosyncratic risks surrounding the Euro and a supportive backdrop for GBP, as the Bank of England has signaled readiness to hike rates if necessary [2].
The Euro was the strongest against the US Dollar today, rising 0.28%, but showed little change against other major currencies such as GBP (-0.02%), JPY (-0.05%), and CHF (-0.03%) [2]. ING highlights that expectations for a December ECB hike are already fully priced in, leaving limited scope for additional hawkish support, while an October move remains unlikely [1].
Looking ahead, traders are focused on the UK’s August GDP report due Thursday and the final Eurozone inflation reading for September on Friday. ING flags the upcoming UK budget on 28 October as a potential risk for sterling, though they do not expect it to trigger significant bond volatility or a lasting negative impact on GBP, given the cautious approach of Chancellor John Healey and Prime Minister Andy Burnham [2].
CONCLUSION
The Euro remains under pressure due to entrenched France-related risks, prompting ING to lower its EUR/USD and EUR/GBP forecasts. While the market is closely watching upcoming economic data and the UK budget, ING does not anticipate significant volatility for GBP, but expects Euro weakness to persist in the near term.