Yesterday, the euro continued to strengthen following statements from several ECB officials, who provided mixed signals regarding the future of monetary easing.

According to Joachim Nagel, a member of the ECB's Governing Council, the central bank is approaching a new phase in which monetary policy will no longer restrain the economy and future decisions will be made based on incoming data.

Citing recent reports indicating a decline in inflation and wage pressures, the Bundesbank President expressed confidence that the ECB could reach its 2% inflation target by mid-year. However, he declined to speculate on whether a rate cut is likely at next week's meeting, stating: "I don't want to speculate on the outcome of the upcoming meetings. We are approaching a level where we are moving out of restrictive territory and into more of a neutral zone."

When asked whether it might be wise to pause rate cuts, the hawkish Nagel suggested that all options remain open, emphasizing that his assessment will depend on the latest economic data.

Nagel's comments reflect the growing internal debate within the ECB over the future path of borrowing costs after five consecutive 25-basis-point cuts since June last year, bringing the deposit rate to 2.75%.

Dovish policymakers argue that low inflation and weak economic growth require additional stimulus. They point to global economic uncertainty and trade tensions, which weigh on domestic demand, justifying further rate cuts to boost investment and consumption.

Hawkish policymakers warn of potential risks to financial stability and future inflation. They fear that prolonged low rates could create asset bubbles and excessive risk-taking while undermining banking sector profitability. Additionally, they caution that inflation could suddenly accelerate as the global economy recovers, potentially forcing the ECB to raise rates sharply later.

Isabel Schnabel, a member of the ECB Executive Board, also stated recently that the ECB is approaching the point where it may pause or refrain from further cuts. However, she highlighted persistently high inflation in the services sector and rising wages, which remain a concern.

Meanwhile, Gediminas Simkus (Lithuania) and Yannis Stournaras (Greece) have indicated that the deposit rate could fall to 2% this year, aligning with market expectations for another rate cut next week, especially given the bleak economic outlook for the eurozone.

Technical Outlook

EUR/USD

Buyers need to regain control of the 1.0500 level, which would allow for a move toward 1.0530. A break above this level could push the pair toward 1.0560, although achieving this without support from institutional players will be challenging. The ultimate upside target remains 1.0590.

If EUR/USD declines, major buyers are expected to emerge around 1.0480. If no strong demand appears, a further drop toward 1.0450 could be anticipated, with the possibility of initiating long positions from 1.0400.

GBP/USD

For the British pound, buyers need to reclaim resistance at 1.2650 to open the way toward 1.2690, where further upside will face strong resistance. The long-term target remains 1.2735.

If GBP/USD declines, sellers will aim to regain control at 1.2610. A successful break of this support level would deliver a significant blow to bullish sentiment, pushing the pair toward 1.2565 with the potential for an extended decline to 1.2520.