Christine Lagarde Considers ECB Monetary Policy to Be Balanced

[Redator]

Yesterday, the euro rose following another speech by European Central Bank President Christine Lagarde, who stated that interest rates are in a good place, a view supported by nearly all of her colleagues.

This has boosted optimism about the continued stability of the European currency, despite ongoing risks related to geopolitical tensions and inflationary pressures.

Markets interpreted Lagarde's remarks as a signal that the ECB is not inclined to change its monetary policy course anytime soon. Investors viewed this as confirmation of the central bank's intention to keep interest rates at their current level — a positive sign for the euro, as it supports returns on euro-denominated assets. However, it is worth noting that her comments came against a backdrop of mixed economic data from the eurozone, where signs of slowing growth have appeared in some countries.

Nevertheless, Lagarde's confidence in the appropriateness of current interest rates outweighed the negative sentiment and gave the euro a boost. The key focus now will be on monitoring macroeconomic indicators — especially GDP growth rates — to assess how justified the ECB's stance is over the long term. If growth remains weak, the central bank could come under pressure to reconsider its plans, which, in turn, could impact the euro's exchange rate.

Policymakers speaking on the sidelines of the IMF's annual meetings echoed Lagarde's remarks, suggesting that the ECB is unlikely to cut its 2% deposit rate, which has been in place since June, at this month's meeting.

Some speakers did warn that inflation risks persist, but viewed a rate cut as the more likely next step. Others expressed concern that price pressures could prove stronger than expected, leaving open the possibility of a rate hike as the ECB's next move.

In any case, the contrast between the ECB's decision to hold rates steady and the U.S. Federal Reserve's move toward rate cuts remains a major driver of the euro's strength and the U.S. dollar's weakness.

As for the current technical picture of EUR/USD, buyers now need to reclaim the 1.1725 level. Only then can they aim for a test of 1.1750. From there, the pair could climb to 1.1780, though doing so without support from major players would be rather difficult. The ultimate target would be the 1.1820 high. In the event of a decline, significant buyer activity is expected only around 1.1680. If there are no large buyers there, it would be reasonable to wait for a retest of the 1.1645 low or consider opening long positions from 1.1610.

As for the current technical picture of GBP/USD, pound buyers need to break through the nearest resistance at 1.3465. Only this will allow them to target 1.3490, above which it will be quite difficult to move further. The ultimate target would be around 1.3525. In the event of a decline, bears will attempt to regain control around 1.3410. If they succeed, a breakout below that range would deal a serious blow to the bulls' positions and push GBP/USD down to 1.3370, with a potential move toward 1.3333.

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