The EUR/JPY cross encountered selling pressure near 165.85 during the Asian session on Thursday, following the Bank of Japan‘s (BoJ) widely anticipated decision to maintain its policy rate.
The BoJ decided to keep the short-term interest rate target unchanged at 0.25% and reiterated its forecast that inflation will remain close to the 2% target. The potential for a stronger Japanese Yen (JPY) may be limited due to ongoing uncertainties surrounding Japan’s fiscal and monetary policy outlook. Sean Teo, a sales trader at Saxo, noted that “any strengthening of the yen at present would likely result from a general weakening of the US dollar if interest rates begin to align.”
Market participants are now focusing on the upcoming press conference by BoJ Governor Kazuo Ueda, which is expected to provide insights into Japan’s interest rate trajectory. Additionally, the cautious sentiment leading up to the US presidential election next week may enhance safe-haven flows, benefiting the JPY.
On the Eurozone front, positive economic data may help mitigate the EUR’s losses. Eurostat reported that the Eurozone economy grew by 0.4% quarter-on-quarter in the third quarter (Q3), surpassing expectations of 0.2%. Year-on-year, the Eurozone GDP expanded by 0.9% in Q3, exceeding the market consensus of 0.8%.
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