ECB's Wunsch keeps July hike in play even as Iran deal eases energy prices

ECB policymaker Pierre Wunsch said the central bank could raise interest rates as soon as July if core inflation shows no sign of easing, even as a U.S.-Iran agreement pushes oil prices lower and reduces headline inflation pressure.

Wunsch, Belgium's central bank governor, told Reuters on Thursday the ECB may hike one more time next month if it sees more evidence of inflation spreading beyond energy. His remarks keep a July move on the table at a time when lower energy costs are already starting to drag headline inflation lower.

Oil prices dropped after news of the preliminary U.S.-Iran deal, which could boost global crude supply. Brent crude fell sharply on the session, easing a key driver of euro zone headline inflation. For the ECB, the lower energy costs reduce headline inflation. The core reading – driven by services and wages – remains the main challenge. Wunsch's hawkish tone suggests the ECB is not yet convinced the oil drop will feed through to underlying price pressures.

EUR/USD traded near 1.0700 on Thursday, little changed on the session. The pair has been range-bound as traders weigh the competing forces of lower energy costs (dollar-negative, euro-positive) against the prospect of further ECB tightening (euro-positive).

The next scheduled ECB meeting is July 27. Wunsch's comments reinforce the bank's data-dependent stance: a strong core CPI print in the coming weeks would increase the probability of a hike. Until then, EUR/USD is likely to stay tethered to incoming inflation data and oil price moves.

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