The EUR/GBP wins as the pound is pressed by fiscal concerns of the United Kingdom

• The euro is strengthened in front of the sterling pound on Friday, supported by the widespread weakness of the pound.
• The tax concerns of the United Kingdom intensify after the approval of the well -being reform project with reduced cost savings measures.
• The PPI of the Eurozone fell 0.6% monthly in May, relieving price pressures and aligning with the cautious posture of the ECB.

The euro (EUR) is strengthened in front of the sterling pound (GBP) on Friday, since the pound remains under pressure amid renewed tax concerns and political discomfort in the United Kingdom. Investors were cautious after the approval of the Government’s Welfare Reform Package of the United Kingdom, which was approved with reduced cost savings measures, reviving concerns about the country’s fiscal credibility.

The EUR/GBP crossing is uploading during the US negotiation hours, around 0.8630 at the time of writing, backed by the widespread weakness of today’s sterling pound. The pair is reducing some of the losses of the previous day and seems to be ready to close the week in positive territory.

The president of the European Central Bank (ECB), Christine Lagarde, adopted a confident but cautious tone in her speech on Thursday, reaffirming the strong commitment of the Central Bank with her inflation target of 2%. Lagarde said that the current trajectory of ECB’s interest rates is “in a good position” after the recent rate reduction, but emphasized that the Governing Council continues to depend on the data and is ready to act if inflation becomes more volatile. Their comments reinforced the ECB’s medium -term strategy, while recognizing that persistent global uncertainty could complicate the inflation perspective in the future.

While the euro finds support for policy, the sterling pound continues to face winds against due to the renewed concerns about the fiscal perspective of the United Kingdom. Reuters reported that the well -being reform project was approved on Tuesday, but with significantly reduced cost savings measures, well below 5 billion pounds (6.83 billion dollars) initially projected in savings. This fault has raised new concerns that the Government could be forced to increase taxes or impose cuts in other places to meet fiscal objectives.

S&P global echoed these concerns, warning that the government’s inability to implement even modest reductions in well -being reflects its “limited margin of budget maneuver.”

In the data front, the latest figures showed additional relief in production prices inflation throughout the Eurozone. The production price index (PPI) decreased 0.6% in monthly terms in May, after a more pronounced drop of 2.2% in April and slightly exceeding market expectations of a 0.5% decrease. In annual terms, industrial production prices informed 0.3% in May, compared to 0.7% of the previous month, in line with forecasts.

Looking ahead, market attention is moving to Alan Taylor, “external member” of the Bank of England, who is scheduled to speak later today at 14:00 GMT. Taylor has previously pointed out a growing concern for the economic perspective of the United Kingdom, warning that the expected “soft landing” is increasingly threatened and perhaps asking for five rates cuts in 2025, one more than the markets had anticipated, citing the weakness of the demand and the pressures of global trade. Investors will be attentive to any new track, particularly around their economic perspective and guidance on feat cuts.