EUR/GBP drifts higher above 0.8750 amid ongoing UK budget concerns

• EUR/GBP strengthens to around 0.8775 in Monday's early European session.
• Most economists expect the BoE to keep interest rates unchanged at 4.0% on Thursday. 
• The French government will begin closed-door talks with lawmakers this week. 

The EUR/GBP cross edges higher to near 0.8775 during the early European session on Monday. Mounting political pressures surrounding UK Finance Minister Rachel Reeves exert some selling pressure on the Pound Sterling (GBP) against the Euro (EUR). The Bank of England (BoE) interest rate decision will take center stage later on Thursday. 

Traders are concerned about UK fiscal risks ahead of Chancellor Rachel Reeves's autumn budget. The threat of higher taxes and fears of slowing economic growth pushed the GBP to its lowest level against the EUR. While most analysts anticipate the BoE to hold rates on Thursday, citing concerns about persistent inflation and the upcoming Autumn Budget. Some said the prospect of tax rises and spending cuts as part of a tough budget had brought forward the likely date for when the BoE will cut interest rates from the current 4% to 3.75%.

The European Central Bank (ECB) kept its deposit rate at 2.0% for a third meeting last week. ECB President Christine Lagarde emphasized that the central bank is "in a good place" and further stated it will do whatever is needed to stay in such a favorable position. Meanwhile, ECB Governing Council member Joachim Nagel said on Monday that Eurozone economic data aren't diverging from the ECB's outlook, but policymakers are keeping their options open. 

The French government will begin closed-door talks with lawmakers this week in an attempt to save the budget from a bitter, Bloomberg reported on Monday. Lecornu hopes to escape the fate of his predecessors, who were forced to resign after facing no-confidence votes over their finance plans, and another government collapse would likely lead to snap elections. Uncertainty and renewed fears of political turmoil in France could undermine the EUR against the GBP in the near term.