Statements from European Central Bank (ECB) policymakers about the possibility of a faster interest rate hike have driven the euro’s surge at the opening of the European session.
ECB vice -chairman Luis de Guindos said the central bank should be able to stop asset purchases in July to pave the way for an interest rate hike as early as that month.
He added that any decision would depend on the ECB's economic forecast at its next meeting in June although it was clear that rising inflation indicated they needed to act quickly.
Even so, he ruled out the possibility that a recession and stagflation would occur in the European Zone.
De Guindos' statement came after policymaker Martin Kazaks also expressed his view that a rate hike was justified as soon as July, where the ECB would not have to wait for stronger wage growth to act.
The euro jumped 0.5% at the beginning of the session to trade above the 1.0900 price level against the US dollar following the statement. Investors now see a 75% chance that the ECB will raise rates in July.
The euro has depreciated sharply to annual lows following the ECB's still "pretext" stance to tighten monetary policy, especially after the Ukraine-Russia war sparked new uncertainty over the bloc's economy.
