The EUR/GBP currency pair settled below recent high of 0.8449, its strongest level since May 21st, in the wake of the European Central Bank’s policy decision.
The ECB lowered all three of its benchmark interest rates by 25 basis points:
– the main refinancing operations rate to 2.15%;
– the deposit facility rate to 2.00%;
– the marginal lending rate to 2.40%.
The policy decision reflected updated inflation and GDP forecasts.
Euro Area’s headline inflation is forecast at 2.0% in 2025 (compared to 2.3% in the prior projection), at 1.6% in 2026 (compared to 1.9% in the prior projection) and at 2.0% in 2027.
Core inflation is projected at 2.4% in 2025 before easing to 1.9% in 2026.
And, GDP growth is projected at 0.9% in 2025, at 1.1% in 2026 (compared to 1.2% in the prior forecast) and at 1.3% in 2027, driven by higher real incomes, strong labor markets and rising government investment.
During the post-meeting press conference, ECB President Christine Lagarde said that the central bank was moving closer to the end of its easing cycle, indicating a potential pause after this week’s cut.
In the meantime, the Pound has drawn support from media reports that UK exporters had received a temporary reprieve from sharp tariff hikes. UK steel and aluminum manufacturers will not be affected by the Trump administration’s recent tariff hike to 50%. Instead, they will only be subject to the already existing 25% duty.
Further aiding the Sterling, the UK’s Composite Purchasing Managers’ Index rose to 50.3 last month, higher than the estimated 49.4.
The EUR/GBP currency pair settled 0.14% lower at 0.8417 on Friday.
The minor Forex pair lost 0.10% for the week.
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