ECB policymaker de Guindos says comparison to energy price shock in 2021-22 is not right
At a Glance
The desk interprets ECB Vice President Luis de Guindos' recent comments as a signal of cautious optimism regarding inflation risks, suggesting that the central bank is better positioned to respond than in previous energy shocks. Per the full note source, de Guindos emphasized the need for patience and clarity in light of geopolitical tensions, particularly the conflict in Iran, which could impact growth indicators. This perspective aligns with a broader sentiment that the ECB will act prudently while monitoring economic data, particularly as inflation pressures appear less acute than in 2021-22. The consensus view among analysts indicates a target range for EUR/USD around 1.04 to 1.12, with our desk leaning towards the upper end of this spectrum.
Full Analysis
What the desk is arguing
The desk believes that the ECB's current stance reflects a more measured approach to inflation risks compared to previous years. De Guindos' remarks indicate that the central bank is prioritizing data-driven decisions over theoretical discussions, which could lead to a more timely response to emerging economic challenges.
Supporting this view, de Guindos pointed out that energy shocks typically affect inflation indicators more quickly than growth metrics, suggesting that the ECB's cautious approach is warranted. He also highlighted the limited fiscal space in the euro area, emphasizing the need for prudence in monetary policy.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a range between 1.04 and 1.12. Notable targets from other firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This perspective aligns with the broader consensus, as our desk's target sits at the upper bound of the range, reflecting a more optimistic outlook on the euro's strength against the dollar.
How other firms see it
Firms like jpmorgan and goldman share a similar optimistic outlook, suggesting that the ECB's careful monitoring of inflation could lead to a stronger euro. Conversely, bofa and citi express caution, anticipating potential downward pressure on the euro due to external economic factors.
Watch the EUR/USD trajectory closely, as it may reflect shifts in ECB policy and broader economic indicators such as inflation rates and geopolitical developments.
What the calendar says
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From the original
I think the inflation risk is lower this time around I think that we were late to act in 2021 and 2022 One reason was that we had too much of an academic discussion about the drivers of inflation Academic discussions are good at university and in academic fora but in central bank
Related speeches
4 itemsECB's de Guindos says current shock is causing lower economic growth and higher inflation
Luis de Guindos: Interview with El País
The desk believes that the ECB's current cautious stance, as articulated by Vice-President Luis de Guindos, reflects a broader recognition of geopolitical uncertainties and economic fragility. Per the full note [source], de Guindos emphasized the need for prudence in monetary policy, particularly in light of rising energy prices and deteriorating economic confidence in Spain. This aligns with our consensus target for EUR/USD at 1.075, which sits comfortably within the range of expectations from other firms. Upcoming inflation data on June 2 will be critical in shaping market sentiment and potential ECB actions.
Luis de Guindos: Interview with Financial Times
The desk believes that the ECB's current cautious stance, as articulated by Vice-President Luis de Guindos, suggests a more tempered approach to interest rate hikes in light of the ongoing energy shock and geopolitical tensions. Per the full note [source], de Guindos emphasized the need for prudence, citing potential negative impacts on growth and consumer sentiment. With inflation expectations remaining stable and markets currently calm, the ECB's next moves will be closely scrutinized, particularly ahead of the upcoming CPI and interest rate decisions in June. The consensus target for EUR/USD remains at 1.075, with a range of 1.04 to 1.12, indicating a cautious outlook on the euro's strength against the dollar.
ECB policymaker Makhlouf says concerned about energy prices staying higher for longer
The desk anticipates a more hawkish stance from the ECB in light of rising energy prices and inflation concerns. Per the full note from Justin Low, ECB policymaker Makhlouf expressed worries that energy prices may remain elevated due to ongoing geopolitical tensions, particularly in the Middle East. This situation could lead to cost-push inflation, prompting the ECB to consider 'insurance' rate hikes to maintain credibility and manage inflation expectations. With the consensus target for EUR/USD at 1.075, the market is closely monitoring these developments as they unfold.
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ECB's de Guindos says current shock is causing lower economic growth and higher inflation