The euro is holding steady against the pound, hovering around 0.8580 during European hours on Wednesday, as markets fully price in a 25-basis-point rate hike by the European Central Bank to 2.5% on Thursday. Surging energy prices driven by the US-Iran conflict are fueling the expected decision, with Eurozone inflation rising above 3% in August. Meanwhile, Bank of England Governor Andrew Bailey stressed that global conflicts are driving energy prices higher, keeping UK inflation risks elevated and supporting pound resilience on dips. ING's global head of macro, Carsten Brzeski, said, "We expect the ECB to hike rates by 25 basis points. Another insurance rate hike," adding, "Or for those who don't like this term: a dovish rate hike."
Markets fully price a 25bp ECB hike to 2.5%, raising the policy rate.
Expected ECB rate hike pushes yields higher.
