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Euro weakens against British Pound as markets pare back ECB hike bets

June 25, 2026

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EUR/GBP softens to near 0.8620 in Thursday’s early European session.
ECB’s Lagarde played down second-round inflation worries.
UK PM Keir Starmer resigned on Monday, raising concerns over the UK political risks.

The EUR/GBP cross declines to around 0.8620 during the early European trading hours on Thursday. Dovish remarks from the European Central Bank (ECB) policymakers weigh on the Euro (EUR) against the British Pound (GBP). Traders await the speeches by the ECB’s Philip Lane and Piero Cipollone later on Thursday for fresh impetus.

While the ECB raised its deposit rate by 25 basis points (bps) to 2.25% at its June policy meeting, ECB President Christine Lagarde delivered a more dovish message, saying that the central bank does not need to respond aggressively to Middle East conflict spillovers.

Lagarde added that the inflation shock facing the Eurozone is too large to ignore but not yet large enough to push up longer-term inflation. Markets pare back future ECB hike bets, undermining the EUR. Financial markets have priced between one and two more hikes, with the next move fully priced in by the end of this year.

On the other hand, political instability in the United Kingdom (UK) might drag the GBP lower and act as a tailwind for the cross. UK Prime Minister Keir Starmer resigned on Monday, throwing the country into yet another political crisis. Starmer stepped down under intense pressure following Andy Burnham’s victory in the Makerfield by-election last week. His Labour Party will now need to select a new leader to lead the country.