EUR/GBP Dives Towards 0.8580 Amid ECB Hike Uncertainty

The EUR/GBP pair has been trending downwards, drifting towards 0.8580 after reaching highs of 0.8590s. This move follows a recent interest rate hike by the European Central Bank (ECB), which increased the main refinancing operations rate to 2.65%. The marginal lending facility and deposit facility rates also rose to 2.90% and 2.50%, respectively.

However, ECB President Christine Lagarde did not commit to future hikes, emphasizing a meeting-by-meeting approach based on incoming data. She noted elevated short-horizon inflation expectations and risks from rising price pressures linked to the Middle East conflict.

In contrast, UK economic data shows surprising resilience with stronger-than-expected industrial and manufacturing output. Historically, when UK GDP beats expectations, the Bank of England tends to keep interest rates restrictive for longer, supporting a bearish outlook for the cross.