ECB Hike Fails to Spark Breakout as BoE Seen Holding Rates

The European Central Bank (ECB) delivered its widely expected interest-rate hike on Thursday, but it only provided limited support to the Euro against the British Pound. The ECB raised its three key interest rates by 25 basis points, lifting the deposit facility rate to 2.50%. This move was seen as a moderate step in combating inflation pressures, particularly due to ongoing Middle East tensions.

According to updated projections, headline inflation is expected to average 3.0% in 2026, 2.5% in 2027, and 2.1% in 2028. ECB President Christine Lagarde stated that the Eurozone economy remains resilient, but shorter-term inflation expectations are still elevated.

The Bank of England (BoE) is expected to keep its policy rate unchanged at 3.75% next week, with all 65 economists surveyed by Reuters anticipating no change in rates for the rest of the year. However, strategists at Scotiabank highlight that markets are pricing a possible hike in November, with around 17 basis points of tightening expected.