Lagarde searches for successor?

[Ben Graham]

While the euro has been losing ground at the start of the year, Christine Lagarde said that ECB lawyers previously concluded that a sitting member of the European Central Bank's Executive Board could not assume the presidency—a position she recommended be reviewed.

The comment followed last week's remarks by Isabel Schnabel, in which the executive board member expressed ambitions to lead the ECB. Journalists in Frankfurt asked Lagarde about the rules on the subject. She said the issue had been considered twice since the euro's creation. She said that on both occasions lawyers and counsel from across Europe had concluded it was not possible, but she added that the question should be revisited to clarify what is possible, what is not, and under what conditions.

Even though Lagarde suggested the matter may merit a third review, Schnabel's chances of replacing Lagarde as ECB president in October 2027 still appear slim. Some experts view Lagarde's statements as a tactical move aimed at consolidating power and strengthening her position within the ECB. By raising questions about legal nuances, she may be indirectly signaling the need to reform appointment rules for key posts, thereby broadening her influence.

In the interview, Lagarde was also asked about potential successors. She insisted that prior praise for Klaas Knot, the former head of the Dutch central bank, did not amount to an endorsement of his candidacy over others. She was specifically asked about Schnabel and Bundesbank President Joachim Nagel, both of whom are German. Lagarde said that there were many very good candidates and that Isabel was one of them, adding that she was confident there would be even more in the future and that she was, in a way, pleased that so many people aspired to her position.

In any case, whoever emerges as Lagarde's successor has not yet affected the euro's exchange rate.

Technical outlook for EUR/USD: Buyers now need to focus on reclaiming the 1.1700 level. Only after that will they be able to target a test of 1.1725. From there, the pair could move to 1.1755, although doing so without support from major players may prove difficult. The farther target is the 1.1780 high. If the instrument declines, I expect significant activity from large buyers only around the 1.1670 area. If there is no interest there, it would be prudent to wait for a new low at 1.1650 or to open long positions from 1.1620.

Technical outlook for GBP/USD: Buyers of the pound sterling should reclaim the nearest resistance at 1.3445. Only then can they aim for 1.3475, above which a breakout will be challenging. The farther target is around 1.3500. In the event of a decline, bears will attempt to take control at 1.3411. If they succeed, a break of that range would inflict a serious blow to bullish positions and push GBP/USD down to 1.3375 with the prospect of extending to 1.3345.

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