EUR/USD Tumbles as Lagarde Dovish Comments Reduce ECB Rate Hike Expectations

The EUR/USD pair declined to around 1.3335 in early Asian trading hours on Wednesday after European Central Bank (ECB) President Christine Lagarde's dovish comments.

Lagarde said rising bond yields would curb economic expansion and limit the transfer of elevated energy costs to inflation, suggesting a less aggressive monetary policy stance from the ECB.

Markets now see a 68% probability of a Federal Reserve (Fed) rate hike in October, but Lagarde's comments have reduced expectations for an ECB rate increase in the same period.

The ECB President emphasized the need for a 'measured response' to keep inflation in check, with no evidence of second-round effects. This has led traders to pare back monetary-tightening bets and now see less than 40% chance of an hike by the ECB in October.