European Central Bank (ECB) policymaker and Bank of Spain's Governor Pablo Hernandez de Cos said in an MNI interview on Wednesday, “the persistence of higher inflation would slow the recovery and would very likely lead to further tightening in the euro area.”

“The longer higher interest rates remain, the more likely that financing cost rises for banks and a deterioration in the quality of credit risk, de Cos added.

Market reaction

At the time of writing, EUR/USD is extending losses toward 1.0800, down 0.33% on the day at 1.0826. Broad-based US Dollar strength amid a cautious market mood is weighing on the main currency pair.