"As the stance of monetary policy tightens further, it will become more likely that the pace of increases will slow," European Central Bank (ECB) policymaker Klaas Knot said on Friday.

"I expect us to reach broadly neutral territory at next month’s policy meeting," Knot added and argued that it would not be consistent to keep a large balance sheet to compress the term premium while tightening policy rates above neutral.

Market reaction

EURUSD edged slightly higher after these comments and was last seen rising 0.2% on the day at 1.0380.