Pound hits 16-month high versus euro as French fiscal woes weigh

Sterling reached a 16-month high against the euro on Wednesday, driven by mounting French fiscal concerns, while the pound fell against a stronger dollar. The euro dropped 0.27% to 84.49 pence, its lowest since June 2025, and slumped 0.6% to $1.1199. Euro zone bond-market turmoil has dampened expectations for European Central Bank rate hikes, while traders see an 81% chance the Bank of England will raise rates in November. The pound weakened 0.3% to $1.3239 as rising oil prices boosted the dollar, and UK 10-year gilt yields touched 5.44%. Focus remains on finance minister John Healey's first budget on October 28, expected to lean toward fiscal tightening. Analysts warn tax increases could hurt investment and weigh on sterling's cyclical outlook.