Euro remains under pressure against British Pound as ECB holds rates steady

• The Euro struggles against the Pound after the ECB leaves rates unchanged.
• The British Pound benefits from easing Budget concerns and expectations of a November BoE hike.
• Attention turns to Eurozone growth and German inflation data due on Friday.

EUR/GBP remains on the back foot on Thursday as the European Central Bank’s (ECB) monetary policy announcement fails to lift the Euro (EUR) against the British Pound (GBP), which outperforms its major peers. At the time of writing, the cross trades around 0.8358, near levels last seen in April 2025, down 0.14% on the day.

The ECB kept its three key interest rates unchanged, as widely expected. The deposit facility rate remained at 2.50%, while the main refinancing operations and marginal lending facility rates stayed at 2.65% and 2.90%, respectively.

In its policy statement, the central bank warned that rising energy prices pose upside risks to inflation and downside risks to growth. However, it noted that underlying inflation had remained broadly stable so far, with little sign of wages responding materially to the energy shock. The Governing Council reiterated its commitment to setting policy to ensure inflation stabilises at its 2% target over the medium term.

At her post-meeting press conference, ECB President Christine Lagarde said “energy prices have risen beyond baseline,” while noting that “most gauges of long-term inflation expectations” were near 2%. She added that the “ECB is unanimously seen as well positioned” and warned that “fiscal uncertainty may further tighten financial conditions.”

The ECB’s cautious stance leaves traders uncertain about a December hike as policymakers balance inflation risks against threats to growth. France’s fiscal uncertainty adds to the challenge, although most economists still expect another rate increase before year-end.

Meanwhile, the British Pound strengthens across the board as Budget concerns ease after UK Chancellor John Healey reaffirmed the government’s commitment to its fiscal rules in the Autumn Budget on Wednesday. Expectations that the Bank of England (BoE) could raise interest rates on November 5 offer further support to Sterling.

Attention now turns to preliminary third-quarter GDP and unemployment figures for the Eurozone, alongside Germany’s preliminary October Consumer Price Index (CPI), all due on Friday.