Sterling extends drop versus euro after German fiscal boost
The pound extended a slide against the euro on Thursday, dropping to its weakest level since January as the single currency benefited from an improving growth outlook after Germany announced plans to massively boost fiscal spending.
Sterling was last at 83.85 pence per euro, down about 0.2% on the day. It's dropped about 1.5% this week, and is on course for its biggest one-week fall since January 2023.
"It's all to do with the broad-based euro optimism that we've seen with this shift in fiscal policy in Germany," said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.
On Tuesday, the parties looking to form the next government of Germany, Europe's largest and the world's third largest economy, agreed to loosen fiscal rules and create a 500 billion euro special fund to boost infrastructure.
That sent the euro surging against major peers and pushed bond yields higher on expectations for more borrowing.
Major investment banks have been quick to lift their growth forecasts for Germany and the euro zone bloc, while some now expect fewer interest rate cuts from the European Central Bank.
The ECB announces policy later on Thursday and is widely expected to lower its deposit rate by 25 basis points, the sixth reduction in the easing cycle.
Bank of England rate setters, meanwhile, are generally sticking to their "careful" approach to interest rate cuts, having lowered borrowing costs for the third time since August last month.
Against the dollar, the pound was down 0.1%, having earlier risen to its highest in four months at $1.2924.
Britain's construction sector contracted sharply last month, a survey showed on Thursday.
The preliminary reading of the S&P Global/CIPS UK Construction Purchasing Managers' Index fell to 44.6 last month from January's 48.1, its weakest level since May 2020.
"Rocketing uncertainty around global trade policy, rising materials prices, and the looming payrolls tax hike in April all conspired to further sap confidence," said Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics.
The all-sector PMI, which combines services, manufacturing and construction, fell to a 16-month low of 50, down from 50.3 in January.
(Reporting by Samuel Indyk Editing by Bernadette Baum)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Arabian Post
20 hours ago
- Arabian Post
Qatar Prints Landmark 3D‑Built Schools at Scale
Arabian Post Staff -Dubai Qatar has embarked on the printing stage of an ambitious architectural endeavour, deploying what are now the world's largest 3D construction printers to build two public schools. Spearheaded by UCC Holding alongside the Public Works Authority, Ashghal, the project forms part of a broader plan to erect 14 new educational facilities under a public–private partnership, but these two structures alone span 40,000 m²—roughly 40 times larger than any previous 3D‑printed building worldwide. Two custom-built BODXL printers supplied by Denmark's COBOD each measure 50 m in length, 30 m in width and 15 m in height—dimensions comparable to a Boeing 737 hangar—making them the largest construction printers ever deployed. The twin schools, each covering 20,000 m² on 100 × 100 m plots, are two-storey edifices designed to showcase scalable, next-gen educational infrastructure. ADVERTISEMENT Extensive preparatory work preceded the launch, including site development, printer assembly and more than 100 full‑scale test prints at a Doha-based trial site using a BOD2 printer. These trials refined concrete mix formulations suited to Qatar's hot climate and developed bespoke nozzles to enhance precision. In May 2025, UCC engineers trained with COBOD specialists in print sequencing, structural layering and on‑site quality management, cementing Qatar's local expertise in advanced construction technology. The project offers clear environmental and operational benefits over conventional construction. By reducing raw material waste, lowering concrete consumption and cutting carbon emissions, 3D printing aligns with sustainable development goals. On‑site production cuts transport requirements and supply chain risk, while round‑the‑clock printing—including overnight operations—helps avoid thermal stress, minimises dust and noise and accelerates timelines. Architectural design draws inspiration from Qatar's landscape: sweeping, dune‑inspired curves are possible only through 3D printing's geometric flexibility—a feat difficult and costly via traditional means. Scheduled to be completed by December 2025, the initiative is expected to redefine sustainable infrastructure while fortifying Qatar's position as a global innovation hub. Co‑founder of COBOD, Henrik Lund‑Nielsen, remarked that this marks both a technological milestone and an environmental turning point in building methodology. A spokesperson at UCC Holding said the venture 'sets a global benchmark' in construction, as Qatar continues to drive pioneering engineering projects across the Gulf.
Zawya
2 days ago
- Zawya
Rush into safe haven assets pushes euro to highest since late 2021
The euro hit its highest level in almost four years against the U.S. dollar as investors rushed into safe-haven assets on Thursday while remaining cautious about the impact of the U.S.-China trade deal. Geopolitical risks were in focus after President Donald Trump said some U.S. personnel were being moved out of the Middle East because "it could be a dangerous place", adding that Washington would not allow Iran to develop a nuclear weapon. A cocktail of rising Middle East tensions and concern over the fragility of the trade truce between the U.S. and China drew investors into safe-haven assets. Analysts noted that the dollar serves as a key barometer of trade talks sentiment, while geopolitical instability prompted investors to buy safe-haven Swiss francs and yen. The franc rose 1.01% to 0.8123 versus the greenback , its highest level since April 22, and the yen climbed 0.70% to 143.40. The euro reached its highest since late 2021 at $1.1610 and was last up 0.99% at $1.1600. Some analysts argued that the euro has also drawn support from a hawkish European Central Bank, which hinted at a pause in its year-long easing cycle after inflation finally returned to its 2% target. However, ECB policymaker Isabel Schnabel said on Thursday the strong euro exchange rate is driven by a positive confidence shock in Europe - investors being drawn to the euro as a safe haven - and not by interest rate differentials. TRADE DEAL DEADLINE On the trade front, Trump said he would be willing to extend a July 8 deadline for completing trade talks with countries. But he added that the U.S. would send out letters in coming weeks specifying the terms for trade deals to dozens of other countries, which they could then embrace or reject. Investors argued that such a move keeps the risk of a July 9 jump in U.S. import tariffs on the table, which is regarded as negative for the dollar. The greenback and U.S. Treasuries dropped sharply after Trump announced a blitz of reciprocal tariffs - which he dubbed "Liberation Day" - in early April. "By year-end, we do not expect the effective average tariff rate to be much different from its current value," said Inga Fechner, senior economist for global trade at ING, indicating duties at 10-15% for the euro area, 50% for China and 10-15% for the rest of the world. Against a basket of currencies, the dollar fell 0.74% at 97.84. It hit 97.786, its lowest since March 2022. U.S. Treasury yields dropped on Wednesday as the closely watched "core" consumer price index eased some pressure on the Federal Reserve to maintain higher interest rates for longer. However, analysts remained cautious about the inflation outlook ahead of Thursday's release of the producer price index. "We suspect the core Personal Consumption Expenditures Price Index (PCE) reading will prove modestly firmer, although the result will also hinge on the inputs from core PPI," said David Doyle, head of economics at Macquarie. "Despite the subdued figures, through year-end, we expect year-on-year core inflation to remain elevated and potentially (to) rise as price pressures flow from recent tariff implementation." Markets priced two Fed rate cuts of 25 basis points by year-end, with an 80% chance of the first move in September and 100 bps by September 2026. The onshore yuan rose 0.1% to 7.1818 per dollar, though gains were capped by the still-fragile truce in the U.S.-China trade war and the uncertainty surrounding the next moves of the two countries. Barclays sees plenty of headwinds over the medium term that could push the currency back onto a depreciation path, even if it might gain a little further from below 7.20. (Reporting by Stefano Rebaudo; editing by Jacqueline Wong, Toby Chopra and Mark Heinrich)
Zawya
2 days ago
- Zawya
No longer the big outlier, Italy sees bond renaissance: Mike Dolan
(The opinions expressed here are those of the author, a columnist for Reuters.) LONDON - As investors wring their hands about mounting public debt loads across the G7, Italy - a country traditionally seen as a poster child for profligacy and unsustainable debts - is enjoying a relative bond market rejuvenation. Italy's borrowing premium over Germany, which typically reflects relative credit risk, bond supply and political risks, has halved in just two years to less than 100 basis points. More remarkably, this spread - seen by many as the pivotal intra euro zone debt metric - is within a few basis points of post-pandemic lows reached in early 2021 and it's fast homing in on the smallest premium since before the euro debt crisis exploded in 2010. While some investors may wonder if there's any more juice left in this trade, Italy traded with a premium of just 20bps over Germany before the global banking crash of 2008. And yet after a decade and half of existential euro debt crises, domestic political upheaval, European Central Bank intervention, a pandemic and the invasion of Ukraine - the nearing milestones are remarkable. Helped by recent European Central Bank easing, nominal 10-year Italian government borrowing rates of 3.5% are back at the average of the entire 26-year euro zone period. IT'S ALL RELATIVE G7 debt markets are often a relative game. Italy's debt-to-GDP ratio - long in excess of 100% - is no longer such an extreme outlier. Even though its current 137% tally remains historically high, the figures for other advanced economies are fast catching up. Italy's debt burden is also one of the few in the G7 that's not projected to keep rising over the rest of the decade. Japan comfortably retains that mantle as the most indebted G7 nation relative to its economic size. But U.S. sovereign debt has zoomed through 100% of GDP, and U.S. President Donald Trump's 'Big Beautiful Bill' making its way through Congress is expected to make that worse. More obviously within Europe, once frugal Germany has also lifted its self-imposed 'debt brake' and committed to fiscal stimulus that will arguably buoy euro zone growth at large even as some see its debt-to-GDP ratio hitting at least 100% within 10 years. And what is just as notable for European investors is that France's deficit and debt struggles mean Italy's risk premia have all but converged with those in Paris. At just 20bps on 10-year debt, it's the lowest since 2008. And Unicredit strategists point out that the 3-year Italy-France spread briefly turned negative earlier this year for the first time in more than 20 years. Once Europe's largest debt pile, Italy's gross government debt outstanding was overtaken by France four years ago. At 3.3 trillion euros last year, according to Eurostat, France's debt pile was last year some 300 billion euros bigger than Italy's. Aided by a relatively stable government by Italy's fractious post-war standards, Prime Minister Giorgia Meloni's administration has been in power since 2022 and Italy's credit ratings are starting to turn up. In April, rating agency S&P Global raised its rating on Italy to "BBB+" from "BBB" in a surprise move and last month Moody's upgraded the outlook on its 'Baa3' rating to "positive". Moody's cited a "better-than-expected" fiscal performance last year and a "stable" political environment, providing a boost for Meloni's plan to keep a lid on annual budget deficits - projected at 3.3% of GDP this year and 2.8% in 2026. "The positive outlook is also supported by a robust labor market, sound household and corporate balance sheets and a healthy banking sector," Moody's said in its report. Goldman Sachs economists this month raised questions about whether the increasingly benign Italian government bond pricing had gone too far given still much-needed structural changes in the economy and a rising European defense spending. But it said there were three 'ameliorating factors' - ongoing fiscal space provided by European Union recovery funds through next year, higher 'real' rates due to disinflation, and continued stable government. What's more, they said higher defense spending may lift Italy's deficit and debt metrics along with other euro countries but joint EU bond sales to fund that meant Italian bond issuance would not increase and the average maturity of its debt could extend further. On top of that, Goldman pointed out, the Italian fiscal balance is improving at the fastest pace among the biggest four euro zone governments - bringing the gap with the euro zone average to its lowest in almost 10 years. Once again, it's all relative. Italy still has a debt problem - but increasingly so too do all its peers. Rome is getting rewarded for keeping it in check at least. The opinions expressed here are those of the author, a columnist for Reuters. (by Mike Dolan; editing by Deepa Babington)
