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Sterling strength, Labour strains

Harry Narenthira
Written by
Harry Narenthira

Harry Narenthira

OFXpert

As a Corporate Account Director at OFX, Harry brings more than 15 years of foreign exchange experience to the table.

| Tuesday 9 September, 2025

Daily Currency Update

Sterling remains resilient as Chancellor Rachel Reeves prioritises fiscal discipline to curb inflation, which hovers near 4%. This stance has dampened expectations for Bank of England rate cuts in 2025, boosting the pound against major currencies. However, internal Labour tensions are rising over constrained public spending. Meanwhile, UK consumer sentiment is increasingly polarised with younger voters show growing optimism under Labour, while over 65s report record-low confidence levels. This generational divide could shape future policy debates, especially as economic pressures persist. The political balancing act between inflation control and public satisfaction is becoming more complex as the year progresses.

Key Movers

The euro remains stable despite fresh political unrest in France, where Prime Minister François Bayrou lost a confidence vote and President Macron’s influence is waning. Markets have so far shrugged off the turmoil, but France’s growing fiscal deficit poses medium-term risks, especially if bond investors begin to question its sustainability. EUR/GBP slipped to 0.8670 following stronger-than-expected UK retail sales (+2.9% YoY), reinforcing sterling’s strength and highlighting UK consumer resilience.

The ECB is expected to hold rates steady at Thursday’s meeting for the second time in a row. Traders will closely watch for any dovish signals, as hints of Q4 rate cuts could pressure the euro. Meanwhile, the dollar remains weak after a soft US jobs report showed slowing hiring and rising unemployment, fuelling expectations of imminent Fed easing. Futures now price a 90% chance of a 25 bps cut next week, with a 10% chance of a larger 50 bps move.

EUR/USD trades between 1.1780–1.1760, driven more by dollar weakness than euro strength. A break above 1.1800 could open 1.1870/1.1900, while support lies at 1.1725/1.1730. GBP/USD is near 1.3560, its highest since mid-August, supported by delayed Bank of England easing relative to the Fed and ECB.

Expected Ranges

  • GBP/USD: 1.3520 - 1.2595 ▲
  • GBP/EUR: 1.1510 - 1.1605 ▲
  • GBP/AUD: 2.0360 - 2.0670 ▼
  • EUR/USD: 1.1710 - 1.1800 ▲

Written by

Harry Narenthira

OFXpert

Harry brings more than 15 years of foreign exchange experience to the table. As a Corporate Account Director at OFX, he leads an experienced team and manages large businesses throughout the UK and Europe, ensuring their foreign exchange needs are met. He and his team provide market insights and strategies to help businesses navigate currency fluctuations successfully.