EUR/GBP falls below 0.8650 on fears over France's political crisis

• EUR/GBP loses traction to around 0.8645 in Monday's early European session. 
• Political uncertainty in France could undermine the Euro. 
• Economists widely anticipate the BoE to hold the key rate at 4.0% on Thursday. 

The EUR/GBP cross attracts some sellers to near 0.8645 during the early European session on Monday. The fears of political turmoil in France drag the Euro (EUR) lower against the Pound Sterling (GBP). Traders will keep an eye on the UK employment report, which is due later on Tuesday. On Thursday, the attention will shift to the Bank of England (BoE) interest rate decision.

The shared currency weakens as the Fitch agency, one of the top global institutions gauging the financial solidity of sovereign borrowers, downgraded France's credit rating on Friday from "AA-" to "A+." This registered the country's lowest level on record at a major credit rating agency. The move came days after François Bayrou resigned as Prime Minister after losing a parliamentary confidence vote over an attempt to get an austerity budget adopted.  

On the GBP's front, the downbeat UK Gross Domestic Product (GDP) and factory data for July might weigh on the GBP and help limit the downside for the cross. The UK economy showed zero growth in July 2025 and a slight slowdown over the three months to July. 

The Bank of England (BoE) will keep its key policy rate on hold at its September meeting on Thursday. According to a majority of economists in a Reuters poll, all 67 economists in the September 8-11 poll expected the UK central bank to keep the bank rate on hold at 4.00%, while a strong majority pencilled in a quarter-point cut next quarter. Three economists forecast 50 basis points (bps) of reduction in the fourth quarter (Q4).