The EUR/GBP currency pair was slightly firmer on Friday, but was still set for a weekly loss, in the wake of the European Central Bank’s policy decision.

Yesterday the Euro lost as much as 0.55% of its value against the Sterling after the ECB lowered all three of its benchmark interest rates by 25 basis points:

– the main refinancing operations rate to 2.40%;
– the deposit facility rate to 2.25%;
– the marginal lending rate to 2.65%.

The policy decision reflected higher confidence that inflation was on track to return sustainably to the ECB’s 2% target. Policy makers noted that wage growth was moderating, while businesses were absorbing some of the cost pressure. Services inflation within the Euro Area has also been easing.

However, the ECB pointed out that the deteriorating outlook for the bloc’s economic growth remained a primary concern. The weakening growth forecast is largely attributed to escalating global trade tensions and the associated uncertainty they generate. In its policy statement, the ECB underscored the intensifying trade disputes were expected to dampen confidence among both households and businesses. Furthermore, the central bank expressed apprehension that the volatile market reactions to these trade tensions could lead to a tightening of overall financing conditions within the Euro Area and further hinder economic activity.

During the post-meeting press conference, ECB President Christine Lagarde said that the decision to lower rates was agreed upon by all Governing Council members. Lagarde acknowledged the “exceptional uncertainty” clouding the economic outlook, citing new trade barriers facing Euro Area exporters, disruptions of international commerce, financial market tensions and geopolitical uncertainty as significant headwinds.

Meanwhile, the Pound faced downward pressure on Wednesday following the release of softer-than-anticipated inflation data out of the United Kingdom.

Annual inflation rate in the UK has slowed to 2.6% in March from 2.8% in February, against market consensus and the BoE’s forecasts of 2.7%.

UK’s annual core CPI inflation, which excludes volatile categories such as food and energy, slowed to 3.4% in March, or the lowest rate since December, from 3.5%.

Easing inflationary pressure has added to expectations that the BoE might be inclined to adopt a more accommodative monetary policy stance, potentially including interest rate cuts in the future.

The EUR/GBP currency pair was last up 0.11% on the day to trade at 0.8565.

The Forex pair has lost 1.18% so far this week.