Euro picks up against British Pound with French debt, Oil prices still weighing

The Euro (EUR) trims losses against the British Pound (GBP) on Friday, as the bond rout eased, allowing for a mild risk appetite during the Asian session. The EUR/GBP pair trades near 0.8500 at the European session opening, up from the 16-month low at 0.8447 hit earlier this week but still on track for a nearly 1.5% decline on a two-week losing streak.

France’s Government Bond yields have pulled back from multi-decade highs on Friday, giving some respite to the single currency, but remain alarmingly high, as the deadlock in the government hinders any credible savings plan. Against this background, the spreading student protests are making things only worse.

The Governor of the Bank of France, Emmanuel Moulin, came out on Thursday to say that the country does not need help from the European Central Bank (ECB), but these sorts of comments are normally more concerning than reassuring. The Eurozone finance ministers and the ECB urged the French government to approve the 2027 budget as soon as possible to calm markets. 

Oil prices above $100 are a headwind to Euro recovery

Beyond that, Crude prices remain high, putting additional pressure on the Euro. Brent Oil trades at the $101.50 area, below Thursday’s highs past $104.00 but still above the key $100 area, a level considered critical for stagflationary risks on the Eurozone’s economies.

In the UK, Bank of England (BoE) Governor Andrew Bailey observed on Thursday that inflation risks are rising as high energy prices persist and reiterated that the central bank is "fully committed to returning inflation to target". These comments feed hopes that the bank may hike interest rates before the end of the year, and provide some support to the Pound.

The calendar on Friday is thin, with the meeting of the Eurozone's Economic and Financial Affairs Council and speeches from ECB Board members Piero Cipollone and Isabel Schnabel as the only events worth mentioning.