The euro continued to unwind gains amid a spate of increasingly hawkish statements from European officials. Over the weekend, Isabel Schnabel again delivered perhaps the firmest signal from ECB representatives in recent weeks. Speaking at a Bank of Korea conference in Seoul, she said bluntly that the central bank could no longer ignore the inflationary impact of the war in Iran. "We can no longer look through this shock. The risk of de-anchoring inflation expectations is rising," she said.

Her thesis on the nature of the current shock is materially important. Schnabel argued that the present crisis differs fundamentally from earlier energy shocks — it is increasingly manifesting as a global demand shock while simultaneously raising production costs across the world. The resulting pressure on producer prices will spread through global supply chains and push inflation on to goods after a prolonged period of containment. "This will exert inflationary pressure basically all over the world," she added. In other words, even if the conflict ended today, damage to energy infrastructure and supply chains has already altered price dynamics on a longer-term basis—and a monetary response will be required in any case.

Her remarks confirm her earlier statement last week that a rate increase at the ECB meeting on 10–11 June is necessary. It is worth noting that similar signals have come from other Governing Council members in recent weeks, albeit with varying degrees of firmness. Deutsche Bundesbank president Joachim Nagel warned last week that the euro area economy is moving toward an adverse rather than a baseline scenario and explicitly supported a June hike. Governing Council member Pierre Wunsch described market expectations of three 25-basis-point increases this year as "reasonable." Christodoulos Patsalides said that "everything points to a rate rise" in June. Pierre Wunsch also emphasized that the conflict had reintroduced inflation at the starting line for the ECB's task.

Only a minority have urged caution. Bank of Greece governor Yannis Stournaras warned against unduly tight policy in the face of weak growth. Francois Villeroy de Galhau urged prudence, noting that second-round effects have not yet materialized—a position Schnabel explicitly rejected, pointing to early evidence of such effects.

On the path beyond June, Schnabel deliberately left the door open: "It's too early to say that it's a certain number of hikes and then it's done" Markets have largely priced a 25-basis-point move for June, and Schnabel's comments have only reinforced those expectations. For the euro that is broadly supportive, but the scope for further appreciation is constrained by a weakening euro area economy and uncertainty surrounding the Strait of Hormuz.

A technical outlook for EUR/USD suggests that buyers should consider securing 1.1670; that would allow a test of 1.1700. From there the pair could advance to 1.1730, although progress beyond that level without support from large participants would be difficult. The farther target is the high of 1.1751. On the downside, only significant buying interest around 1.1630 is likely to trigger major interventions by large players. If that support is absent, it would be prudent to wait for a new low at 1.1610 or to consider long entries from 1.1585.

As for GBP/USD, sterling buyers should first clear resistance at 1.3480 to target 1.3510; advancing above that level may prove difficult, with a further target at 1.3548. If the pair falls, bears will seek control at 1.3450. A decisive break below 1.3450 would likely deal a serious blow to bullish positions and could push GBP/USD toward 1.3410, with downside potential to 1.3370.