According to APP, Joachim Nagel, a member of the European Central Bank's Governing Council and president of the Bundesbank, said during Friday's European trading session that the ECB may need to raise interest rates if the eurozone's economic outlook does not improve significantly. The ongoing conflict between the US and Iran continues to impact global growth prospects and cause inflation expectations to decouple, which has exacerbated the ECB's cautious consideration of its policy path.

Joachim Nagel recently emphasized that the European Central Bank (ECB) has already assumed a tighter monetary policy in its baseline scenario, and supports a rate hike in June if the inflation outlook does not improve significantly in the latest June forecast. He noted, "From the current perspective, the situation is less optimistic than in the earlier baseline scenario, making it more appropriate for the Governing Council to respond in June if the outlook does not improve significantly." This statement highlights the ECB's high level of vigilance regarding price stability against the backdrop of geopolitical conflicts driving up energy prices and inflationary pressures.

The market has not yet reacted strongly to Nagel's comments. As of the latest data, the EUR/USD exchange rate has risen slightly by about 0.15%, hovering around 1.1750-1.1765, mainly driven by the overall weakness of the US dollar. Eurozone economic growth faces pressure; first-quarter GDP growth was only 0.1% quarter-on-quarter, lower than expected. Coupled with the energy shock and uncertainty caused by the US-Iran conflict, this has further slowed the pace of recovery. Institutions such as the International Monetary Fund have lowered their 2026 Eurozone growth forecast to about 1.1%, while inflation risks are rising, showing signs of stagflation.

The following table summarizes the main positive and negative factors at present:

From a technical perspective, EUR/USD is currently finding some support above 1.17. If it can effectively hold above the 1.1780-1.1800 area, it may test higher levels further; conversely, if it falls back to around 1.1670, it may face renewed downward pressure. The next ECB meeting will be held in mid-June, at which time the latest economic forecasts will be the focus of the market.

Editor's Summary:
Eurozone monetary policy is at a critical juncture, fraught with geopolitical risks and inflationary pressures. Joachim Nagel's hawkish remarks reinforced the ECB's signal of flexibility. Investors should pay attention to the outcome of the June meeting, energy price trends, and the inverse impact of US economic data on the dollar, balancing the policy trade-off between slowing growth and price stability.