ING Says ECB Lagarde's Comments Suggest Stronger Euro Could Restart Cutting Cycle

11:40 AM EST, 02/05/2026 (MT Newswires) -- President Christine Lagarde's comments at Thursday's policy meeting press conference seemed to create more confusion than certainty over the next European Central Bank move, said ING.

Instead of simply sticking to the well-known phrases like 'we don't pre-commit' or 'we remain data-dependent', comments on the risk assessment and particularly on the exchange rate were very fluid, wrote the bank in a note.

As in December, the risk assessment no longer concludes with the balance of risk but rather lists all upside and downside risks, stated ING. When asked, Lagarde stated that risks were currently broadly balanced.

As regards the exchange rate, Lagarde repeated the well-known ECB refrain that the exchange rate is not a policy target but an important element in the growth and inflation forecasts. However, she tried to downplay the strengthening of the euro (EU), stressing that the current level was broadly in line with the historical average, added the bank.

Lagarde also stated that a stronger international role of the euro would not have to go hand in hand with a stronger currency. Here, ING objects.

In any transition towards a more important international role for the euro, an appreciation of the currency would seem inevitable, according to the bank.

In the end, a more attractive currency means more demand for it, which, in turn, strengthens the exchange rate. Needless to say, that up to now the 'global euro moment' has been more dream than reality, added ING.

If the euro were to strengthen again after the recent rebound of the U.S. dollar (USD), for example, towards 1.25 EUR/USD by the March meeting, there is a high risk that the ECB's inflation forecasts will show inflation staying below 2% for three years in a row, possibly even below 1.8%, noted the bank. While no one would perceive this as a deflationary risk, such an inflation undershoot could raise doubts about how symmetric the ECB's inflation target really is and as such still encourage more dovish ECB members to push for an insurance rate cut.

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