Weekly round up & the week ahead

Weekly Currency Update

The euro suffers as French debt fears bite, hitting 18-month lows against the dollar and lifting GBP/EUR towards 1.18.

A widening gap between French and German borrowing costs left the single currency with its worst week against sterling in four months. Sterling's gains are largely a by-product of euro weakness; it still remains under pressure against the dollar.

Week in review

The euro was the story. Sterling held up against it but lost ground to the dollar.

EUR/USD fell for a fourth straight week to around 1.12, its weakest since early 2025. French borrowing costs jumped relative to Germany's, with the gap at a 14-year high after France's 2027 budget. Hopes of further ECB rate hikes faded despite expectations of higher eurozone inflation, and oil above $100 a barrel on Middle East tensions added to the pressure.

GBP/EUR rose around 1% to roughly 1.176 (0.850), the highest since mid-July and just shy of the 2026 peak near 1.18, driven more by euro weakness than UK strength.

GBP/USD slipped below 1.3200 to a four-month low, a fifth weekly decline, as a global bond sell-off drew money into the dollar. Weak UK manufacturing data did not help, and while Bank of England comments have leaned towards higher rates, markets already price in a good deal of tightening.

Friday brought relief. US payrolls rose by just 29,000 against 90,000 expected and unemployment ticked up to 4.2%. The dollar eased, sterling recovered above 1.3200, and expectations of further Federal Reserve hikes cooled. Signals of closer UK-EU ties also offered the pound some support.

Week ahead

The focus moves from politics and oil to central bank signals and data.

• Today: final services PMIs for the UK, eurozone and US, plus US ISM services, a read on whether last Friday's softness spreads.
• Tuesday: UK construction PMI and eurozone retail sales.
• Wednesday: minutes of the Fed's September meeting, likely the week's biggest event for the dollar. A cautious tone would extend Friday's dollar pullback.
• Thursday: the ECB's account of its last meeting, and a speech from the Bank of England Governor, where any hint on the pace of rate rises could move sterling.

Beyond the data, French fiscal headlines and the oil price remain the main risks for the euro, with the Fed, ECB and other major central banks all meeting later this month.

Sterling is caught between a hawkish Bank of England and fragile UK growth, so volatility is likely to continue. If you have payments or exposure coming up, speak to your Clear Treasury dealer for tailored analysis, forecasts and ways to protect your rate.

Sources: ECB reference rates, Saxo, FXStreet, Trading Economics, MUFG Research

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