ECB vice president de Guindos says that inflation remains in a good place

ECB Vice President de Guindos has stated that inflation remains in a good place. He noted that high uncertainty in the global environment does not seem to be reflected in current market pricing, but there are significant downside risks to growth, particularly due to geopolitical tensions. Moreover, financial stability risks remain elevated as valuations in increasingly concentrated asset markets appear stretched. The ECB is comfortable maintaining a sidelined policy stance for now, a message that has been well-received by the markets, which do not expect any interest rate changes this year. The euro, however, is caught in a challenging spot, rejecting the 1.1800 level in EUR/USD and facing its own structural challenges that limit its ability to benefit from recent dollar weakness. Ongoing fragmentation in the euro area bond market and lingering political risks in France continue to undermine the euro's overall potential. Simultaneously, the dollar has its own issues, which contributes to the prevailing tug-of-war dynamics in the currency pair.