The European Central Bank (ECB) held its interest rates steady at 2.0% during its latest monetary policy meeting, as widely expected. However, the debate continues among ECB governing council members on the inflation outlook, with some members expressing concerns about upside risks to inflation. Despite recent data showing stronger-than-expected economic activity in the eurozone, including a 0.2% quarter-over-quarter increase in GDP and slightly stronger-than-expected consumer price index (CPI) in Germany and Spain, the ECB remains cautious in its monetary policy stance.

Chief economist Philip Lane favors small adjustments to monetary policy to counter weak eurozone demand, while Isabel Schnabel is more concerned about upside risks to inflation. The split on the governing council highlights the challenges facing the ECB in navigating the complexities of the global economy and managing expectations around inflation.

Meanwhile, the outlook for US interest rates remains uncertain, with some Fed officials questioning the market’s pricing of another cut. The Federal Open Market Committee (FOMC) cut rates by 25 basis points to a 3.75-4.00% range on Wednesday, but Fed Chair Jerome Powell acknowledged that the market may be pricing in too many rate cuts in the coming months.

The ECB’s “fine tuning” bias ahead of its December meeting could cap upside gains for the EUR-USD exchange rate, while the uncertain outlook for US rates may continue to influence the currency pair’s movements. As always, investors and traders will be closely watching economic data and central bank decisions to gauge the direction of the euro-dollar exchange rate in the coming weeks.