ECB’s Schnabel flags rising inflation expectations and a likely June rate hike, but EUR fails to gain on USD due to option expiries.
EUR/USD remains range-bound around 1.1600–1.1645 despite hawkish comments from ECB member Schnabel, who warned of rising medium-term inflation expectations. She signaled a probable June rate hike to counter de-anchoring risks, citing lessons from 2022’s inflation shock.
Eurozone yields edged higher after Schnabel’s remarks, but a modest narrowing in the 2-year US/EU spread failed to lift the single currency. Large option expiries in the 1.1600–1.1645 range continue to anchor price action, limiting volatility.
Upcoming inflation data in both the US and Eurozone will influence Fed and ECB policy decisions, with markets awaiting further clarity on the timing and scale of rate adjustments.