In the Asian session on Monday (April 24), EUR/USD fell slightly, temporarily reporting 1.0987, a drop of 0.02%. European Central Bank Governing Council and Belgian Central Bank President Wensch warned that investors are underestimating the rise in euro zone borrowing costs. He insisted that he would agree to stop raising rates only if wage growth starts to slow.
“We’re waiting for wage growth and core inflation to come down along with headline inflation before we get to a point where we can pause rate hikes,” he said, raising the bar on what the ECB must meet to halt rate hikes . “I wouldn’t be surprised if we had to raise the deposit rate to 4% at some point.” He suggested that borrowing costs could rise more than investors expected. Investors are betting the ECB’s deposit rate will rise to just above 3.75%. Investors expect the ECB to hike rates more than the Federal Reserve and the Bank of England, which are expected to raise rates by 25 basis points next month.
