EUR/GBP holds positive ground above 0.8700 as France’s Macron unveils new government

• EUR/GBP gathers strength around 0.8705 in Monday’s early European session. 

• Worries over taxes weigh on the Pound Sterling. 

• France’s Macron unveiled a new government ahead of the budget deadline. 

The EUR/GBP cross trades with mild gains near 0.8705 during the early European session on Monday. The Pound Sterling (GBP) weakens against the Euro (EUR) amid concerns over potential tax increases in the upcoming Autumn Budget. Traders brace for the UK employment report for fresh impetus, which will be released later on Tuesday. 

Analysts expect the UK Chancellor of the Exchequer Rachel Reeves to raise taxes in the Autumn Statement again to meet her fiscal targets, which is scheduled for late November. The potential tax increases in the upcoming UK Autumn Budget could affect the UK economic growth and dampen the overall sentiment of households, which might exert some selling pressure on the GBP and create a tailwind for the cross. 

"With the Autumn Budget 2025 in focus, we remain bearish on sterling, due to weakening growth prospects," said analysts at bank J. Safra Sarasin.

French President Emmanuel Macron unveiled a new government after holding long talks with newly reappointed Prime Minister Sebastien Lecornu ahead of a deadline to present next year’s budget to parliament. Investors’ sentiment improved as Lecornu indicated that dissolving parliament and thus holding snap elections was unlikely. This, in turn, lifts the EUR against the GBP. 

The European Central Bank (ECB) President Christine Lagarde said that she hopes France will produce a budget in time to meet international commitments. However, any signs of renewed political uncertainty in France could undermine the Euro in the near term.