French PM François Bayrou may rue his own decision to hold a confidence motion in his premiership this evening. The outcome is looking increasingly certain. We look at what the fallout from that will be, how it might affect ECB interest rate decisions later this week and more in this week’s Market Update.
Current rates
| Currency pair | Rate |
|---|---|
| eur usd | 1.1724 |
| gbp eur | 1.1518 |
| gbp usd | 1.3510 |
Rates correct as of 10:30am on Monday 8 September but may now have changed.
The Big 3
Three stories covering the latest developments in economies, currencies and borders.
France heads for political upheaval following no-confidence vote
French Prime Minister François Bayrou is bracing for a no-confidence motion that could topple his minority government. He called it, in a bid to find more backing for his latest budget proposals but with opposition parties uniting against his deficit-cutting plans, the outcome later this evening is looking increasingly set in stone. His proposals – €44bn in spending cuts, tax hikes, and even scrapping public holidays – have proved deeply unpopular. Should Bayrou fall, President Macron will have to either appoint a new premier or risk fresh elections (something he has said he won’t do), raising doubts over whether any administration can rein in the largest budget deficit in the euro-zone. Renewed instability in Europe’s second-biggest economy could weigh further on the euro.
ECB ready to hold steady on rates amidst political unease
The European Central Bank is expected to leave rates unchanged this week, as policymakers weigh persistent inflation against growing political and fiscal uncertainty in France. The likely collapse of François Bayrou’s government risks derailing efforts to repair the eurozone’s second-largest economy, leaving the ECB cautious on its next steps. While new forecasts will be released, officials appear in no hurry to cut again, signalling that clearer data on growth and inflation will be needed before shifting policy.
Dollar hits six week low after jobs miss
The US dollar tumbled to six-week lows after August’s Nonfarm Payrolls data badly missed expectations. Just 22k jobs were added last month versus forecasts of 75k, while unemployment rose to 4.3% – its highest level since 2021. The weak print, alongside downward revisions to earlier months, has cemented market expectations for the Fed to cut rates at its September meeting, with investors even speculating on a larger 50bps move. The dollar index plunged as a result, before finding some footing in recent sessions.
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Looking forward
Monday: French PM confidence vote. BRICS US tariff summit (sans Modi). Japan GDP. China Exports and Balance of Trade.
Wednesday: China CPI. US PPI MoM.
Thursday: US CPI. ECB interest rate decision.
Friday: UK GDP. France, Germany, Spain and India report CPI. University of Michigan US consumer sentiment.
Here’s what we’re talking to our clients about
We’re always here to support. Here are some of the conversations we’re having:
- UK economy and government change
- Impact of French political uncertainty and the EUR.
- What’s happening in September (🕺)
The contents of this article do not constitute financial advice and are provided for general information purposes only.