As the euro struggles to make further gains against the dollar amid renewed risk of a breakdown in US-Iran peace talks, Isabel Schnabel, a member of the European Central Bank's Executive Board, delivered arguably the firmest policy signal in recent weeks—saying the ECB should raise rates in June regardless of whether the Middle East conflict ends. "Even if the war ended today, significant damage has already been done—to energy infrastructure and to global supply chains. A monetary response will still be required," she said.

Schnabel said the ECB has effectively moved beyond the adverse scenario outlined in its March projections, which assumed a rapid normalization of oil prices. From a resilience perspective, she argued, that scenario is no longer plausible. Crucially, and in contrast with some more cautious colleagues, Schnabel warned of early signs of a second wave of inflation as the shock to energy prices begins to spread into other items in the consumer basket. "Turning a blind eye to what is happening is no longer an option," she said.

Rhetoric in the Governing Council has widened in recent days and remains heterogeneous. Joachim Nagel, president of the Deutsche Bundesbank, warned last week that the euro area economy is moving toward an adverse scenario rather than the baseline and favored a June hike. Pierre Wunsch called market expectations of three 25-basis-point hikes this year "reasonable." Christodoulos Patsalides also indicated that conditions point towards a June rate increase.

There are dissenting voices. Yannis Stournaras last week cautioned against unduly tight policy given weak growth, while Francois Villeroy de Galhau urged caution, noting that second-round effects had not yet materialized. Schnabel explicitly rejected that line of argument.

Markets have already fully priced a 25-basis-point increase for the ECB meeting on 11 June. The key event will be the publication of updated macroeconomic projections; ECB staff will present three scenarios—baseline, adverse, and severe — and those numbers will guide not only the June decision but also the subsequent path of policy. Schnabel, however, said the ECB should avoid pledging a path beyond June, noting that each subsequent step must depend on the data. The tone is broadly positive for the euro, but the extent of any appreciation will be constrained by a weakening euro area economy and continued uncertainty over the Strait of Hormuz.

The current technical analysis of the EUR/USD pair suggests that buyers should consider taking 1.1650. Clearing that level would allow a test of 1.1680 and could extend to 1.1700, although advancing beyond that point without support from large players is likely to prove difficult. The next target on a successful push would be 1.1721. On the downside, only buying interest near 1.1635 would prompt significant action from major buyers; absent that support, it would be prudent to wait for a break of the 1.1610 low or consider long entries from 1.1585.

As for the GBP/USD, buyers need to clear resistance at 1.3500 to target 1.3530; advancing above that level could be difficult, with a further target at 1.3560. If the pair falls, bears will look to establish control at 1.3450. A confirmed break below 1.3450 would likely inflict meaningful damage on bullish positions and could push GBP/USD toward 1.3390, with a potential extension to 1.3345.