The euro traded near 0.8365 British pounds early Thursday as investors awaited a European Central Bank decision with implications for borrowing costs across the euro area. FXStreet's 3:27 a.m. ET (07:27 UTC) snapshot put one euro at about 0.8365 pounds, below a session peak of 0.8374; the outlet said the pair remained within Wednesday's range. The ECB calendar lists its rate decision for 9:15 a.m. ET (13:15 UTC), followed by a news conference at 9:45 a.m. ET (13:45 UTC).
Reuters and FXStreet reported that markets widely expected the ECB to keep its deposit rate at 2.50%. Reuters said another increase was possible in December, a pre-decision market expectation rather than an announced rate path. The ECB announced a 25-basis-point increase in each of its three key rates on Sept. 10, effective Sept. 16, taking the deposit rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending rate to 2.90%.
The ECB's September outlook said consumer-price growth could stay well above the bank's 2% goal for a prolonged spell, with pressure linked to the conflict in the Middle East. Reuters reported that French government borrowing costs were near levels seen only rarely in 25 years. The agency also said the extra yield on French debt compared with German bonds exceeded the equivalent gap for any other euro-area government.
Reuters described the inflation pressure as a reason for tighter policy, while saying elevated French borrowing costs could weigh on growth. In September, the ECB said it would weigh the evidence anew at each policy meeting without signaling a predetermined series of rate moves. The next scheduled step was the ECB's rate announcement at 9:15 a.m. ET, followed 30 minutes later by ECB President Christine Lagarde's news conference.
