Member of the ECB Executive Board Isabel Schnabel Changed Her Mind

[Ben Graham]

Meanwhile, as the European currency continues its confident rise against the U.S. dollar, European Central Bank Executive Board member Isabel Schnabel said yesterday that she does not expect interest rates to be raised in the near future. Let me remind you that at the beginning of last week she held a radically different view, stating that she did not rule out an increase in borrowing costs.

Speaking after her recent comments—which prompted investors to increase bets on higher borrowing costs next year—Schnabel said that she had not spoken about the need to raise interest rates. "At the moment, no interest rate hikes are expected in the foreseeable future," she said in a podcast released on Monday. "Rates are likely to remain stable for quite a long time, unless some unforeseen events occur."

Such statements from senior ECB officials introduce a certain degree of confusion into currency markets. Investors and traders are trying to decipher what actually lies behind these contradictory signals. On the one hand, the strengthening of the euro suggests that the market sees potential for tighter monetary policy in the euro area. On the other hand, Schnabel's words indicate that the ECB may not be rushing to raise rates, fearing negative consequences for economic growth.

The disagreements within the ECB are likely related to differing views on the current economic situation. Some council members believe that inflation in the euro area is around the target level and that there is no urgent need to change rates. Others, concerned that the economy may slow, advocate a cautious approach by the ECB. In any case, such fluctuations in ECB rhetoric create additional volatility in the currency market. Traders have to constantly revise their forecasts and adapt to changing conditions. In this situation, the ability to analyze economic data and understand the motives guiding ECB representatives becomes particularly important.

Recently, many officials have made it clear that they are comfortable with the current level of interest rates, which they consider optimal, as inflation has returned to the 2% target and the economies of the 20 eurozone countries continue to grow, albeit slowly.

"I did not say that interest rates should be raised," Schnabel emphasized. "Rather, they should not be lowered again. This is a very important distinction."

As for the current technical picture of EUR/USD, buyers now need to think about how to take out the 1.1780 level. Only this will allow them to target a test of 1.1800. From there, it is possible to climb to 1.1830, but doing so without support from major players will be quite difficult. The most distant target would be the high at 1.1865. In the event of a decline in the trading instrument, only around the 1.1750 level do I expect any serious action from large buyers. If no one appears there, it would be better to wait for an update of the low at 1.1730 or to open long positions from 1.1705.

As for the current technical picture of GBP/USD, pound buyers need to take out the nearest resistance at 1.3490. Only this will allow them to target 1.3525, above which it will be quite difficult to break through. The most distant target would be the 1.3560 level. If the pair declines, bears will try to seize control of 1.3455. If they succeed, a breakout of this range will deal a serious blow to bullish positions and push GBP/USD toward the low at 1.3415, with the prospect of moving on to 1.3375.

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