ECB turns a blind eye to recession risks for now

<p>In case you missed the headlines from yesterday and today:</p><ul><li><a href="https://www.forexlive.com/centralbank/ecbs-kazaks-market-bets-on-rate-cuts-in-early-2024-are-wrong-20230627/" target="_blank" rel="follow">ECB's Kazaks: Market bets on rate cuts in early 2024 are wrong</a></li><li><a href="https://www.forexlive.com/centralbank/ecbs-de-cos-we-will-hike-rates-again-in-july-not-possible-to-say-what-comes-after-that-20230623/" target="_blank" rel="follow">ECB's de Cos: We will raise interest rates again in July</a></li><li><a href="https://www.forexlive.com/centralbank/ecbs-simkus-at-least-one-more-rate-hike-required-20230626/" target="_blank" rel="follow">ECB's Simkus: At least one more rate hike required</a></li><li><a href="https://www.forexlive.com/centralbank/ecbs-simkus-should-not-rule-out-the-option-of-a-september-rate-hike-20230627/" target="_blank" rel="follow">ECB's Simkus: Should not rule out the option of a September rate hike</a></li><li><a href="https://www.forexlive.com/centralbank/ecbs-lagarde-inflation-remains-too-high-20230627/" target="_blank" rel="follow">ECB's Lagarde: Inflation remains too high</a></li></ul><p>Given the circumstances, it is not too surprising to see policymakers brush off the weaker economic performance towards the end of Q2. They have already signaled a rate hike for July, so there is no backing down now.</p><p>If you recall, the euro fell on Friday after the poor PMI figures for June <a href="https://www.forexlive.com/news/forexlive-european-fx-news-wrap-euro-slides-as-pmi-data-disappoints-heavily-20230623/" target="_blank" rel="follow">here</a>. And as the ECB brushes off those risks, we are seeing the single currency regather some poise this week. EUR/USD is up 0.4% to 1.0945 currently, also helped out by a calmer market mood and a marginally softer dollar.</p><p>But if you want a clear signal of policy conviction, you only have to look towards EUR/JPY as the divergence between the ECB and BOJ has sent the pair higher again to fresh highs since 2008:</p><p>This also comes as yen bulls have grown increasingly frustrated awaiting a pivot under the Ueda regime, which hasn't come whatsoever since April.</p>

This article was written by Justin Low at www.forexlive.com.