Forex investors are trying to take advantage of the recent collapse of all currencies against the dollar, which jumped to its highest level in 20 years due to expectations of a US interest rate hike. Those currencies lack the momentum to change direction. In the case of the EUR/USD currency pair, which collapsed to the 0.9552 support level, it tried to rebound higher, but its gains did not exceed the 0.9780 resistance level. Pressures are increasing on the European Central Bank to further tighten its policy to prevent the euro from further collapse.

In this regard, according to ECB board member Martins Kazak, the ECB should raise interest rates by another 75 basis points when it sets its next policy in October, and the steps are likely to be reduced after that. Kazak said yesterday in an interview in Vilnius: “In the current situation, we can still take big steps, and the next step still has to be big because we are still far from rates that correspond to a 2% inflation rate.” and “I would agree on 75 basis points – let’s take a bigger step and raise prices faster.”

The Latvian official added that this does not mean that „75 basis points is a standard thing from now on”, and that it is possible that once rates are more in line with the inflation target, future steps „will need to become somewhat more cautious”. His calls for strong action are likely to be echoed by other officials from the Baltic region as they meet at a conference in the Lithuanian capital, Vilnius, on Thursday. The inflation rate in the Eurozone is currently 20%.