EUR/USD extends its gains for the second successive day, trading around 1.1380 during the Asian hours on Friday.
Policymakers from the European Central Bank (ECB) send mixed signals; the impact on the Euro (EUR) usually boils down to a mix of volatility, capped upside, and a general weakening trend against the safe-haven US Dollar (USD)
ECB policymaker Isabel Schnabel reiterated on Thursday that the central bank’s monetary tightening cycle is not yet over. While acknowledging that short-term economic conditions have outpaced expectations, Schnabel warned that a recent ceasefire should not prompt policymakers to lower their guard. She emphasized that, from today’s perspective, further interest rate hikes will be necessary to steer inflation back down to the ECB’s 2% medium-term target.
Earlier this week, ECB President Christine Lagarde noted that the central bank can avoid aggressive policy reactions to geopolitical spillovers from the Middle East. While Lagarde acknowledged that the Eurozone’s inflation shock is too significant to ignore, she emphasized it remains insufficient to drive up long-term inflation. The EUR/USD pair remains stronger as the US Dollar (USD) holds losses despite growing expectations of a Federal Reserve (Fed) rate hike.