For now, the euro is in demand following the decision of the US Federal Reserve to keep interest rates unchanged. According to Isabel Schnabel, a member of the Executive Board of the ECB, the European Central Bank's fight against inflation might require another interest rate hike. She stated in her speech on Thursday, "After a long period of high inflation, inflation expectations are fragile and renewed supply-side shocks can destabilize them, threatening medium-term price stability," she said in a speech Thursday in St. Louis. "This also means that we cannot close the door to further rate hikes."

The German Executive Board member spoke a week after the ECB kept interest rates unchanged for the first time in over a year. Markets and economists expect the deposit rate to remain at 4% until 2024, as inflation has slowed sharply in recent months. In October, it dropped to 2.9%, which is quite close to the European Central Bank's target.

Schnabel also mentioned that it is expected to take several more years for inflation to return to 2%, even after it peaked at 10.6%. She emphasized that the rigidity of prices and wages means that core inflation is more stable, and it needs to be treated with greater attention. "The growth in unit labor costs eventually needs to fall back to levels that are broadly consistent with 2% medium-term inflation. Firms will have to use their profit margins as a buffer to limit the pass-through of the current strong wage increases to consumer prices," Schnabel said.

She also compared the recent push toward the ECB's 2% inflation target to the final stretch of a long-distance race, often considered the most challenging. "The disinflation process during the last mile will be more uncertain, slower and bumpier," Schnabel warned of potential new disruptions, such as tensions in the Middle East, strikes at LNG plants in Australia, and global warming.

Regarding the technical picture of EUR/USD, to maintain control, buyers should stay above 1.0620. Doing so could pave the way to 1.0640. From that level, there is potential to reach 1.0670, but achieving this without support from major players will be quite challenging. The farthest target is located at a high of 1.0700. If the pair declines, significant actions from major buyers could be seen around 1.0620. If no one steps in at that level, it might be wise to wait for a new low of 1.0590 or to consider going long from 1.0570.

Meanwhile, demand for the pound remains the same after the price exceeded the resistance level of 1.2180. A further increase could be expected after gaining control over 1.2220. Regaining this range will bring back hope for a recovery towards 1.2250, after which a sharper rise to around 1.2285 can be anticipated. If the pair falls, bears will attempt to take control of 1.2180. If they succeed, a breakout of this range will affect bulls' positions, pushing GBP/USD down towards a low of 1.2155 with the potential to touch 1.2130.