The euro rose to a two-month high against the dollar after the European Central Bank signaled it is likely to pause its easing cycle following eight consecutive rate cuts.

Policymakers described current rates as appropriately positioned, pointing to a modest pickup in eurozone inflation and steadier growth data across member states.

The move widened the policy divergence with the Federal Reserve, which markets still expect to cut rates at least twice more this year.

Currency strategists said a firmer euro could weigh on European exporters’ competitiveness if the rally extends, though most see the currency settling in a range near current levels.