The EUR/JPY pair reversed its two-day losing streak on Thursday, trading around 161.20 during the Asian session as the Japanese Yen (JPY) struggled following the Bank of Japan’s (BoJ) decision to hold interest rates steady.
In line with market expectations, the BoJ maintained its short-term policy rate at 0.15%-0.25% for the third consecutive meeting after its two-day monetary policy review. The BoJ’s policy statement indicated that inflation is projected to align with its target by the latter half of its three-year projection period, extending through fiscal 2026. However, the BoJ also highlighted significant uncertainty surrounding Japan’s economic and price outlook, noting that foreign exchange (FX) volatility could have a more pronounced impact on inflation due to changes in corporate wage and price-setting behavior.
While the EUR/JPY pair saw upside, the Euro faces challenges due to growing expectations that the European Central Bank (ECB) may cut interest rates at each meeting until June 2025. These concerns stem from the ECB’s focus on mitigating mounting economic risks in the Eurozone.
ECB President Christine Lagarde, speaking at the Annual Economics Conference, expressed the central bank’s readiness to implement further rate cuts if data confirms that disinflation remains on track. Lagarde also stated that the previously emphasized goal of maintaining “sufficiently restrictive” rates is no longer justified, adding to the market’s concerns about the Euro’s near-term prospects.
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