The EUR/GBP pair extended its rally for the third straight day on Friday, trading near 0.8430 during Asian hours. The cross steadied following the European Central Bank’s (ECB) widely anticipated 25 basis point rate cut on Thursday, which lowered interest rates from 2.25% to 2.0%.
In its statement, the ECB reaffirmed its commitment to stabilizing inflation around the 2% medium-term target. The bank emphasized a data-driven, meeting-by-meeting approach to monetary policy, citing the current environment of exceptional uncertainty.
ECB President Christine Lagarde, speaking at a post-meeting press conference, described the monetary policy stance as “well-positioned” but acknowledged heightened uncertainty. She indicated the central bank is nearing the end of its easing cycle.
Supporting this view, ECB policymakers Madis Muller and Martins Kazaks weighed in Friday. Muller concurred with Lagarde that the easing phase is “almost finished.” Kazaks suggested a possible pause in rate changes in July, noting that inflation has lingered below 2% but vigilance remains necessary.
Despite the ECB’s dovish move, the EUR/GBP may face headwinds from a strengthening Pound Sterling. UK market sentiment received a boost after US President Donald Trump signed an executive order granting temporary relief from steep 50% US tariffs on steel and aluminum exports to the UK, though a 25% tariff still applies. This development bolsters the GBP amid improving risk sentiment, potentially limiting further EUR/GBP gains.
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