Pound Holds Steady Ahead of ECB Rate Decision

The pound held steady against the euro and dollar on Thursday, ahead of the European Central Bank's expected interest rate hike. The market is positioning cautiously, anticipating a quarter-point increase to 2.5% by the ECB.

U.S. inflation reports due later this week could also impact expectations for a Federal Reserve rate hike next week. Sterling has traded within a narrow range against the euro in recent weeks, with little change on Thursday.

UK GDP data is expected to show the economy stalled after growing 0.3% in June, leaving annual growth at 1.2%. However, strong first-half growth has put Britain on track to be one of the G7's fastest-growing economies.

George Vessey, lead FX and macro strategist at Convera, notes that support from warm weather and the soccer World Cup is likely to fade, posing risks to both the pound and interest-rate outlook.