ECB Governing Council member Joachim Nagel warned policymakers to remain vigilant ahead of the July rate decision. Speaking at the Rencontres Economiques forum in Aix‑en‑Provence, the Bundesbank chief said the central bank must keep all policy tools available as inflationary pressures persist across the eurozone. markets price in a modest probability of another hike today for investors and traders now.

Nagel reiterated earlier statements that the cessation of Middle‑East hostilities cannot be assumed, underscoring geopolitical risk to price stability. He noted supply‑chain strains and energy price volatility could reignite inflation even if core metrics appear settled. Traders have trimmed euro‑dollar short positions, pushing the euro’s forward curve lower ahead of the policy meeting and tightening credit conditions in Europe today.

Analysts interpret Nagel’s caution as a signal that the ECB may leave rates unchanged but retain the option to react swiftly. Eurozone government bond yields slipped 3 basis points after the remarks, while the euro weakened against the dollar. Investors should monitor upcoming inflation data for clues on whether the central bank will adjust its stance in the coming weeks.