Speculation on ECB Rate Hike Lifts EUR/USD Above 1.17

EUR/USD strengthened by about 0.5% and broke through the 1.1700 level again on Thursday (April 30) following the latest policy decision from the European Central Bank. The gains were supported by growing speculation of monetary tightening, as Lagarde's tone during the press conference was perceived as increasingly hawkish. At the same time, the US dollar was pressured by Japan's intervention in the foreign exchange market.

While the ECB left its policy settings unchanged and refrained from offering explicit forward guidance, markets interpreted several of Lagarde's comments as signaling a shift toward tighter policy. She noted that short-term inflation expectations have begun to diverge from the previously optimistic baseline scenario.

Lagarde also emphasized that the duration of geopolitical conflicts and high energy prices could potentially increase inflationary pressures while also affecting economic growth more broadly.

Furthermore, she revealed that the option of raising interest rates has become part of the discussion in the meeting. This statement further strengthens the markets' belief that the ECB is likely to raise interest rates in June.

These expectations have made the euro relatively more attractive compared to the US dollar, which is widely anticipated to remain on hold through year-end. However, the euro’s performance still lags behind currencies with more aggressive tightening outlooks, such as the Australian dollar and the British pound.

Meanwhile, EUR/JPY experienced heightened volatility due to Japan's intervention. The pair briefly tumbled from around 187.50 to 182.29 before recovering to near 183.80 toward the end of the session.