The EUR currency has started to recover from hawkish comments by Fabio Panetta and Gediminas Simkus of the ECB. The comments suggest that ECB members are likely to be willing to hike by 50 bps, and that wage growth threatens to entrench inflation at levels that are too high, putting additional pressure on rate hikes.
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- It is possible that the ECB rate will not peak before the summer;
- Wage growth is expected to exceed historical norms;
- Core inflation remains high, indicating that the fight against inflation is far from over;
- The ECB should continue to raise interest rates by 50 bps.
- I am concerned about inflation despite recent good readings;
- We can reduce inflation through well-balanced rate hikes;
- The effects of ECB tightening are not yet fully felt;
- We remain very cautiously optimistic about inflation;
- I can't say what will happen to rates after the February meeting, the ECB should not preliminarily; commit to any specific policy move.
EURUSD chart, D1 interval. EURUSD has halted declines near the SMA200 (red line) and is back above the SMA100 (black line). Source: xStation5