EUR/GBP edges higher amid UK fiscal uncertainty, French credit downgrade

• EUR/GBP edges higher on Monday, supported by mounting concerns over the UK budget outlook.
• Cautious remarks from Bank of England officials help limit Sterling's losses.
• S&P's downgrade of France's credit rating caps the Euro's upside potential.

EUR/GBP trades slightly higher at 0.8690, up 0.12% for the day on Monday at the time of writing, as investors remain cautious amid rising fiscal uncertainty in the United Kingdom (UK). The Pound Sterling (GBP) stays under pressure after Chancellor of the Exchequer Rachel Reeves confirmed that the government does not plan to increase the wealth tax in the upcoming Autumn Budget, due next week, while announcing further tax hikes and public spending cuts. These signals reinforce doubts about the sustainability of the UK's public finances.

Comments from the Bank of England (BoE) provide some support for the GBP. Governor Andrew Bailey stated that any future interest rate cuts would be "gradual and careful," while Chief Economist Huw Pill advocated for a measured approach given persistent inflationary pressures. Investors now await this week's UK inflation figures, which could influence expectations of additional rate cuts before the end of the year.

On the other side, the Euro (EUR) remains weighed down by fiscal concerns in France, after S&P Global Ratings downgraded the country's credit rating to A+ from AA-. The move, which follows earlier downgrades by Fitch and DBRS, amplifies perceptions of rising fiscal risk in the Eurozone. Meanwhile, German Producer Price Index (PPI) data showed another monthly contraction in September, marking the third consecutive decline and signaling ongoing disinflationary pressure.

Finally, market participants await speeches from European Central Bank (ECB) Executive Board member Isabel Schnabel and Bundesbank President Joachim Nagel later in the day. Their remarks may provide further clues on the monetary policy outlook, as the ECB remains in a wait-and-see mode amid a fragile economic backdrop.