ECB policymaker Kazaks says a material strengthening in the euro could trigger a response

ECB policymaker Kazaks has expressed that a significant and rapid strengthening of the euro could necessitate a policy response from the ECB. This aligns with remarks from ECB President Lagarde, who noted that a stronger euro could lower inflation beyond current expectations, although she mentioned that EUR/USD has been tracking along the overall average. This suggests the currency is nearing the ECB's threshold of concern, possibly close to the 1.20 level for EUR/USD. Other policymakers have echoed similar sentiments, with Villeroy stating that downside inflation risks are significant, despite acknowledging there is no specific FX target from the ECB. Additionally, Stournaras commented that recent euro appreciation has not been dramatic, but the central bank remains vigilant amid global uncertainties. With increasing comments from ECB officials about the exchange rate, it is evident that any significant dollar weakness moving forward will have traders closely monitoring the 1.20 level.