Sterling Holds Firm Against Euro as ECB Meeting Looms

Sterling held firm against the euro on Thursday. The European Central Bank's rate decision dominates the session. No UK data or headlines shifted the pair. The pound stayed near the top of its recent range against the single currency.

The ECB meets at 12:45 GMT. The deposit rate is widely expected to stay at 3.75%. Market attention is on President Christine Lagarde's press conference at 13:30. Swaps price roughly an 80% probability of a cut in September. The decision today sets the tone for that path.

The trade is two-sided. A hawkish hold, one where Lagarde pushes back against September cut expectations, could lift the euro. EUR/GBP would then test the 0.8420 area, a level that has capped the cross since early June. A dovish tilt, or a surprise cut, would weaken the euro and open a run at the July low near 0.8350.

Sterling has its own support. UK two-year yields stand roughly 50 basis points above German yields. That differential has kept EUR/GBP from breaking decisively in either direction. The Bank of England meets next week. Markets see a 45% chance of a rate cut. That is the next domestic catalyst.

Broader risk appetite is quiet. European equities opened flat, tracking muted Asian trade. The dollar was mixed, with the dollar index near 104.20. The light UK calendar leaves sterling a passenger for today.

The ECB decision is due at 12:45 GMT. Lagarde speaks half an hour later. Until then, sterling holds its ground.