EUR/GBP stays with losses near 0.8350 after ECB reduces interest rates by 25 bps

• EUR/GBP sees more downside after the ECB cut key borrowing rates by 25 bps.
• This is the second straight interest rate cut by the ECB as Eurozone inflation cools down.
• Soft UK inflation data has prompted BoE dovish bets.

The EUR/GBP pair remains fragile after the European Central Bank (ECB) policy meeting in which the central bank cut its Rate on Deposit Facility by 25 basis points (bps) to 3.25%. The ECB reduced its key borrowing rates for the second straight time.

The central bank was already expected to cut its key borrowing rates as recent commentaries from officials indicated that they more worried about stagnation in economic growth than taming price pressures in the Eurozone.

The central bank has also cut the Main Refinancing Operations Rate by 25 bps to 3.4%. Market participants expect the ECB to reduce its borrowing rates further in its upcoming monetary policy in December as the Eurozone economic outlook has worsened due to growing expectations that former US President Donald Trump will win presidential elections, which are scheduled for November 5. Tariffs on imports are expected to rise in Trump’s administration, which will weigh on exports from European and Asian economies.

Meanwhile, the Pound Sterling (GBP) gains ground on Thursday after a sharp sell-off on Wednesday. The GBP dived after the release of the United Kingdom (UK) Consumer Price Index (CPI) report for September, which showed a slowdown in price pressures.

The service inflation, a closely watched indication by Bank of England (BoE) policymakers, decelerated to 4.8%, the lowest level since May 2022. Soft inflation data has prompted market expectations that the BoE could cut interest rates in each of the two policy meetings remaining this year, which are scheduled in November and December. Before the inflation data, traders were pricing only one interest rate cut in either of the two policy meetings.