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EUR/USD drops near 1.1350 after Lagarde calls for measured ECB moves

EUR/USD closed just above 1.1350, after sliding below 1.1400 over the prior three sessions, as Lagarde cautioned that the energy shock is too large to ignore.

Reported · Written up by our desk · Major Pairs

EUR/USD fell back toward its late-July low near 1.1350 after ECB President Christine Lagarde pushed back on expectations for faster rate hikes, according to FXStreet. The pair closed just above 1.1350, following a move below 1.1400 over the prior three sessions.

Lagarde told a European Parliament committee that the energy shock is too large to look through, but that a measured response remains appropriate because there is not yet evidence that energy costs are feeding into wages. FXStreet noted Eurozone inflation was 3.2% in August, with energy prices up 14.3% year over year, and the ECB projects inflation averaging 3.0% this year and 2.5% in 2027.

FXStreet also reported Lagarde said long-term interest rates have risen since the ECB's September meeting, which should slow growth and reduce the pass-through of energy costs versus what the ECB projected. Traders took this as support for fewer or smaller ECB hikes, with the Euro also facing a rate differential versus the Fed, which FXStreet characterized as backing a smaller rate lift for EUR against the dollar.

Separately, FXStreet said the ECB raised its deposit rate to 2.50% on September 10, its second increase this year, and that futures indicated about a 60% chance of another hike on October 29.

Latest closeEUR/USD 1.139 ▲0.1%

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