FX.co ★ Euro Rebounds Amid ECB Rate Hike Speculation

The euro rebounded to $1.16 at the close of a turbulent week, recovering from a more than seven‑month low, after the European Central Bank signaled a tougher line on inflation amid surging oil and gas prices linked to the conflict in Iran. On Thursday, the ECB left interest rates unchanged but raised its inflation projections and cut its growth forecasts for the coming years, citing increased uncertainty stemming from the turmoil in the Middle East.

This shift has prompted major financial institutions to bring forward their expectations for monetary tightening, with some now projecting a rate hike as early as April. Markets are fully pricing in an increase by June and assigning a 60% probability to a move in May. ECB policymaker Joachim Nagel underscored that a rate hike next month remains on the table if price pressures continue to mount, while François Villeroy de Galhau reiterated the Bank’s readiness to act decisively.