European Central Bank Governing Council member Joachim Nagel has raised concerns about the US dollar's traditional safe-haven status, warning that doubts have intensified as the currency weakens. Speaking to entrepreneurs in Baden-Baden, Germany, the Bundesbank president noted that the euro's appreciation against the dollar since last March significantly impacts growth and inflation in the euro area.

While most ECB officials have downplayed the euro's recent ascent as a threat to inflation, Nagel emphasized that the current inflation picture remains favorable overall. He reiterated the central bank's commitment to its meeting-by-meeting approach while maintaining readiness to adjust monetary policy in any direction when necessary. With the next monetary-policy meeting less than three weeks away, officials generally feel comfortable with the deposit rate at 2%, considered broadly neutral.

Nagel acknowledged risks of weaker-than-expected economic activity, particularly due to US President Donald Trump's trade policies and potential prolonged inflation undershoots. Recent national readings showed mixed price growth across Europe, with France and Spain experiencing acceleration while Germany saw unexpected slowdown to 2%. Economists predict the 21-nation region will maintain 1.7% inflation overall.