The EUR/USD pair gained 1.2% to break 1.14 and continues to rise on Friday.

The market is likely preparing for weak data on the US labor market, which will be published on Friday.

The euro rose to a three-week high against the dollar after ECB President Christine Lagarde said inflation is likely to remain elevated for a longer period of time than previously thought, writes DJ Newswires.

The balance of risks to inflation is "tilted to the upside", especially in the short term. She said the Board of Governors expressed "unanimous concern" over the latest data pointing to high inflation.

In January, consumer prices rose by 5.1%, which was a record high in the history of the eurozone. Energy prices remain the biggest headache for the European economy (+28.6%), followed by other commodity groups, including food (+3.6%).

The effect of a “bombshell” on the foreign exchange market was produced by a press conference of the head of the ECB, Christine Lagarde, where she, answering questions from journalists, unexpectedly refused to confirm the forecast that the regulator does not plan to raise interest rates this year, writes finanz.

Bloomberg sources familiar with the course of the ECB meeting said that the Board of Governors considered it reasonable not to rule out a rate hike this year. According to them, the “recalibration” of the policy could be publicly announced at the March meeting.

The ECB will be the latest in a string of reserve-currency-issuing central banks that have pumped $10 trillion into the markets since March 2020 and are now trying to tighten measures to curb inflation. The market is already forecasting two ECB rate hikes by September.

The Fed's rate hike has already been priced into the market, so the focus now is on the actions of other central banks. The ECB is likely to raise rates faster than we thought, Silicon Valley Bank notes.

According to Reuters, Deutsche Bank closed short positions on the European currency and advised clients to bet on its growth. But it is still premature to expect rapid growth from the euro: an increase in the ECB rate is hardly possible before the fourth quarter.