FX.co ★ Euro Maintains Its Leading Position

While the U.S. dollar faces certain challenges from the risks of a more aggressive interest rate cut cycle by the Federal Reserve—which could begin as early as next month—the most rebellious member of the European Central Bank's Governing Council has made his final proposal before leaving his post later this month.

ECB's chief hawk, Robert Holzmann, who at times single-handedly said "no" during rate-cutting policy debates, wants outside observers to understand the mindset of policymakers better when they set borrowing costs. "When we start, unanimity is a strong signal," Holzmann said in an interview before handing over control of Austria's Central Bank to former economy minister Martin Kocher. "But if the situation is not entirely clear as to which direction we should take, since arguments go in all directions, then I think deviations from the consensus carry information for the market."

With inflation returning to the 2% target, Holzmann did not support the June rate cut, which would have further reduced borrowing costs. He also questioned other steps taken during the rate-cutting campaign. Holzmann's stance reflects deep concern over the potential risks of premature monetary policy easing.

While reaching the inflation target is undoubtedly a positive signal, he emphasized the need for a careful assessment of the trend's sustainability. Cutting rates, in his view, could trigger a new wave of inflation, especially given the lingering uncertainties stemming from U.S. trade policy.

His call for greater transparency was first voiced at his farewell dinner in Frankfurt in July, when Christine Lagarde asked him how the ECB could operate more effectively. "For some people, it's easier to be dissenters than for others," Holzmann said. "But there were moments when, in my view, deviating from the consensus became necessary."

The farewell advice concludes Holzmann's six-year tenure at the ECB, during which the 76-year-old was one of the strongest advocates of the unprecedented rate hikes undertaken to contain the sharpest price surge in the eurozone's history.

Amid major personnel changes at the ECB this year, Holzmann declined to say who might replace him on the far end of the hawkish spectrum. "With seven new people coming in, I can assume that at least one or two of them could take the lead," he said. "From informal discussions, I know that many often supported me on substance, but not on the final decision."

It is worth noting that the ECB's hawkish stance typically supports the euro, strengthening its position against a range of other assets.

As for the current EUR/USD technical picture, buyers now need to capture the 1.1730 level. Only this will open the way for a test of 1.1770. From there, the pair may reach 1.1790, though doing so without the backing of major players will be rather difficult. The furthest target would be the 1.1825 high. In the event of a decline, I expect significant buying activity only around 1.1695. If no major buyers appear there, it would be better to wait for a test of the 1.1660 low or consider opening long positions from 1.1635.

As for the current GBP/USD technical picture, pound buyers need to capture the nearest resistance at 1.3555. Only this will allow for a move toward 1.3590, above which a breakout will be difficult. The furthest target would be the 1.3615 area. In case of a decline, bears will attempt to regain control of 1.3520. If they succeed, breaking this range will deal a severe blow to the bulls' positions and push GBP/USD down to the 1.3480 low, with the prospect of extending losses toward 1.3445.