Euro Stays on the Back Foot Against British Pound After ECB Leaves Rates Unchanged

• The ECB’s decision to hold rates steady leaves the euro struggling against the pound.
• Easing Budget worries and expectations of a November BoE rate rise lend support to sterling.
• Friday’s eurozone growth figures and German inflation release come into focus.

The European Central Bank’s (ECB) decision to leave monetary policy unchanged provides no support for the euro (EUR) against the British pound (GBP) on Thursday, keeping EUR/GBP under pressure. Sterling is outperforming its major counterparts. The cross stands at around 0.8358 at the time of writing, down 0.14% on the day and close to levels last recorded in April 2025.

As widely anticipated, all three of the ECB’s key interest rates were held steady. The deposit facility rate stayed at 2.50%, with the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%.

Higher energy prices present upside risks to inflation and downside risks to growth, the central bank cautioned in its policy statement. It nevertheless observed that underlying inflation had so far been broadly stable, with scant evidence of a material wage response to the energy shock. The Governing Council reaffirmed that it would set policy to ensure inflation stabilises at its 2% target over the medium term.

Speaking at the press conference after the meeting, ECB President Christine Lagarde noted that “most gauges of long-term inflation expectations” were close to 2%, although “energy prices have risen beyond baseline,” she said. She also stated that the “ECB is unanimously seen as well positioned” and cautioned that “fiscal uncertainty may further tighten financial conditions.”

With policymakers weighing inflation risks against threats to growth, the ECB’s cautious approach leaves traders unsure whether a December rate rise will materialise. Fiscal uncertainty in France compounds the difficulty, though most economists continue to anticipate a further increase before the end of the year.

Sterling, meanwhile, is gaining across the board following an easing of Budget concerns. In Wednesday’s Autumn Budget, UK Chancellor John Healey reaffirmed the government’s commitment to its fiscal rules. The prospect that the Bank of England (BoE) could increase interest rates on November 5 provides additional support for the pound.

Friday’s releases will now draw attention: preliminary third-quarter GDP and unemployment data for the eurozone, together with Germany’s preliminary October Consumer Price Index (CPI).