Despite political turmoil in France, the euro is expected to strengthen against the pound, as the combined effects of fiscal sustainability concerns and stagflation worries are weighing on sterling.

Although the UK's 30-year borrowing costs are currently at multi-decade highs, fiscal pressures are eroding the pound's yield advantage. British inflation remains stubbornly persistent, with PMI data showing only preliminary improvements, while the prospect of autumn tax increases further clouds the outlook.

In contrast, despite uncertain political prospects in France, eurozone inflation continues to hover near the European Central Bank's 2% target, limiting room for further monetary easing in the region. Given the lower stagflation risks in the eurozone, the euro holds a relative advantage.