Lagarde’s Speech Sends the Euro to Dollar Rate 50 Pips Up

The euro to dollar rate has been on an uptrend for two weeks as risk sentiment improves, but it failed to reach 1.09 last week, and retreated to 108 lows after the attempt. However today we’re seeing some renewed buying interest for the Euro which has sent EUR/USD price 50 pips higher, with the ECB president Lagarde also helping along the way.

Christine Lagarde made many comments in an interview with Kanaal Z, highlighting several key points regarding the Eurozone’s economic outlook and inflationary pressures. Overall, Lagarde’s comments underscored the complexity of managing inflationary pressures amid economic recovery and highlighted the ECB’s commitment to achieving its inflation target while considering various factors, including wage dynamics. So, they’re backing up from a March rate cut, helping improve the sentiment for EUR/USD .

ECB President Lagarde’s Recent Remarks

• Signs of Economic Recovery: Lagarde notes increasing signs of a bottoming-out in growth, suggesting that the Eurozone economy may be stabilizing. She also mentions forward-looking indicators pointing to a potential pick-up later in the year, indicating optimism about future economic prospects.
• Strong Wage Pressures: Despite the economic challenges, Lagarde emphasizes that wage pressures remain robust. This suggests that workers are exerting upward pressure on wages, which could eventually feed into higher inflation if sustained.
• Disinflationary Process Continues: Lagarde acknowledges that the current disinflationary process is expected to persist. This implies that while inflation may remain subdued in the near term, the ECB aims to ensure it gradually moves towards its target of 2% over the medium term.
• Impact of Wage Costs on Inflation: Lagarde highlights the importance of wage costs in determining inflationary trends. She mentions that labor cost increases are not being fully passed on to consumers, indicating that businesses may be absorbing some of these costs. This dynamic could influence the trajectory of inflation going forward.
• Monetary Policy Stance: Lagarde reaffirms the ECB’s restrictive monetary policy stance, emphasizing the importance of maintaining inflation expectations and preventing a sustained wage-price spiral. This suggests that the ECB may be cautious about implementing further rate cuts, particularly if wage pressures persist.

ECB President Lagarde made some additional comments afterward, underscoring the ECB’s commitment to achieving its inflation target of 2%, achieving this target is crucial for supporting economic growth and stability over the long term.

EUR/USD Live Chart