The EUR/JPY currency pair is trading in negative territory around 160.70 early on Monday, with the Japanese Yen (JPY) gaining ground following hawkish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda. The comments have introduced downward pressure on the cross rate. Focus is shifting towards the Eurozone’s flash Harmonized Index of Consumer Prices (HICP) for August, set to be released on Friday.
Governor Ueda reaffirmed the BoJ’s commitment to raising interest rates if inflation remains on track to meet the 2% target sustainably. While a majority of economists anticipate another rate hike from the Japanese central bank this year, opinions are divided on whether it will occur in October or December, according to a Reuters poll. The speculation surrounding potential rate hikes has strengthened the JPY against the Euro (EUR).
On the Eurozone side, investors are awaiting the preliminary inflation data for August, which could provide insights into the European Central Bank‘s (ECB) September interest rate decision. Forecasts suggest inflation may ease to 2.3% year-on-year in August, raising expectations for the ECB to continue reducing interest rates through the end of the year. This expectation contributes to selling pressure on the Euro.
ECB Governing Council member Olli Rehn stated on Friday that the combination of slowing inflation and economic weakness in the Eurozone bolsters the case for lowering borrowing costs next month.
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