Concerns about a possible recession in the eurozone are real and justified, this is the conclusion reached by Governing Council member of the European Central Bank, Yannis Stournaras.

In an interview, the head of the Bank of Greece stated that so far there are no clear signs of a material impact from higher energy prices on inflation, although it is still too early for precise assessments. He said that the ECB, which last week left interest rates unchanged, is focusing its analysis on the risk of so-called second-round effects, such as stronger wage pressures, higher prices, and rising inflation expectations.

He said that the ECB's response would depend on the intensity and duration of the Middle East conflict, commenting on its potential impact on the eurozone economy. His assessment underlines the delicate balance the ECB will have to strike in making future policy decisions.

First, the regulator will assess the nature of the energy shock caused and exacerbated by the Middle East conflict. He explained that, if the energy shock proved temporary and did not lead to significant second-round effects — such as broad transmission of inflation to other sectors or long-term supply chain disruptions — there would be no need to adjust monetary policy. In that case, the ECB would likely continue to follow its current strategy, refraining from premature action.

However, if the consequences prove more pronounced, policy scenarios may require intervention. He noted that if this led to a material, but not particularly persistent, overshoot of the ECB's inflation target, a measured policy adjustment would reduce the intensity of second-round effects. This could mean, for example, a moderate rate increase aimed at cooling the economy without sharply curbing growth.

The most severe scenario envisages a significant and prolonged inflation surge. He stressed that, if this resulted in a substantial and lasting deviation of inflation from the target, the response would have to be decisive. In such a situation, the ECB may resort to a more aggressive tightening stance, including sizeable rate hikes, to secure price stability over the long term, even at the cost of slower economic growth.

Technical picture, EUR/USD

Regarding the current technical picture for EUR/USD, buyers should now consider how to take the 1.1750 level. Only this will allow a test of 1.1767. From there, a move to 1.1784 would be possible, but achieving that without support from major players will be rather difficult. The most distant target is the high at 1.1805. In the event of a decline only to around 1.1720, I expect some serious action from large buyers. If there is nobody there, it would be prudent to wait for a refresh of the low at 1.1695 or to open long positions from 1.1675.

Technical picture, GBP/USD

As for the current technical picture for GBP/USD, pound buyers need to take the nearest resistance at 1.3600. Only this will allow a target of 1.3625, above which breaking through will be rather difficult. The most distant target is the 1.3650 area. In the event of a fall, bears will try to seize control at 1.3560. If they succeed, a break of the range will deal a serious blow to bulls' positions and push GBP/USD toward the low at 1.3535, with the prospect of reaching 1.3505.