Yesterday, Executive Board member Isabel Schnabel delivered a speech in which she said that the European Central Bank should keep borrowing costs at their current level, shifting inflation risks to the upside.

In an interview published Tuesday, the hawkish German official noted that Europe's economy is holding up well despite trade disruptions from the U.S., though price growth in the coming years may fall short of forecasts. "I believe that we may already be taking a moderately accommodative stance, and therefore I see no reason for further rate cuts under the current circumstances," Schnabel said. "I still believe tariffs, in pure form, are inflationary."

Her statement came amid rising concerns over the outlook for the European economy, clouded not only by trade wars but also by internal challenges. While her comments carried an optimistic tone, they also underscored potential risks for future economic growth. Lower-than-expected price growth could point to weakening consumer demand and investment activity, which in turn may slow the pace of recovery after the pandemic. At the same time, this could give the European Central Bank more room to maneuver in its monetary policy.

Schnabel added that borrowing costs worldwide could begin to decline sooner than expected due to trade measures, high government spending, and population aging. "I think the moment when central banks around the world start cutting interest rates again could come sooner than many currently believe," Schnabel said.

The comments came just two days before the one-week quiet period ahead of the ECB's next monetary policy meeting on September 11, at which officials are expected to keep borrowing rates unchanged for the second time.

As for the current technical picture of EUR/USD, buyers now need to focus on regaining the 1.1655 level. Only this would allow for a test of 1.1685. From there, the pair could rise toward 1.1715, though doing so without support from large players will be challenging. The furthest target is the 1.1740 high. In case of a decline, I expect significant buyer activity only around 1.1625. If no support emerges there, it would be better to wait for a retest of the 1.1605 low or consider long positions from 1.1575.

As for GBP/USD, buyers need to break through the nearest resistance at 1.3390. Only this would allow a move toward 1.3430, with further gains beyond that proving difficult. The furthest target is the 1.3470 level. In case of a decline, bears will attempt to regain control at 1.3340. If successful, a breakout of the range would deal a serious blow to bullish positions and push GBP/USD toward the 1.3310 low, with the prospect of reaching 1.3280.