- The EUR/JPY pair continues to rise after the publication of the latest Eurozone inflation data, which was in line with estimates.
- The Japanese cabinet secretary's comments suggest authorities could be close to intervention in the currency market.
- New comments from ECB spokespersons could cause fluctuations in EUR/JPY.
The EUR/JPY pair is trading around 164.00 on Wednesday, up more than a tenth. The cross's fluctuations appear to have been driven primarily by a combination of Eurozone inflation data and comments from a Japanese government official aimed at supporting the Japanese Yen (JPY).
EUR/JPY rose after the publication of the final Harmonized Index of Consumer Prices (HICP) figure for March in the Eurozone by Eurostat. The final estimate showed no change from the initial publication, which showed an annual rise of 2.4% in the HICP and 2.9% in the core HICP. Both figures were down from 2.6% and 3.1%, respectively, the previous month.
Although the data showed no change, the Euro (EUR) rose against most of its peers after the release, perhaps because market expectations had fallen. Recent dovish comments from European Central Bank (ECB) officials have suggested a growing willingness to cut interest rates due to falling inflation and faltering growth, and this could have been responsible for the lower outlook.
On Tuesday, for example, ECB President Christine Lagarde said the ECB would cut rates soon, barring a surprise, and that the ECB was closely monitoring oil prices due to tensions in the Middle East.
EUR/JPY's rise has been tempered by comments from Japanese Chief Cabinet Secretary Yishimasa Hayashi, who intervened verbally on Wednesday to support the yen. Hayashi said that “we are closely watching the currency market movements” and that they are “prepared to take all measures.”
This could indicate that the Japanese authorities are seriously considering direct intervention in the currency markets in which they would sell their foreign exchange reserves to buy yen in the hope of strengthening them. The knock-on effect of such intervention, although most felt in the USD/JPY, would likely result in a weakening of the EUR/JPY pair.
His intervention may have come in the wake of recent comments from Federal Reserve Chairman Jerome Powell, in which he stated that “recent data show a lack of further progress in inflation this year,” adding: “If a higher inflation, the Fed can maintain the current rate as long as necessary.”
His comments caused an appreciation of the US dollar because maintaining higher interest rates tends to be positive for a currency. This is due to the fact that foreign capital inflows increase. As a result of Powell's statements, the USD/JPY pair surpassed 154.00. This figure exceeds the ideal threshold of 150.00, beyond which the Japanese do not like their currency to devalue.
A series of speeches by key ECB members on Wednesday, including ECB Executive Board member Piero Cipollone, ECB Executive Board member Isabel Schnabel and President Christine Lagarde herself, could also affect EUR/JPY volatility. .
The release of Japanese trade data overnight had little effect on the exchange rate. The data showed only a slight moderation in exports, which continued to grow above 7.0% year-on-year in March, a drop in Imports of 4.9% (after a 0.5% increase in the previous month), and a balance surplus trade of 366.5 billion yen, compared to the deficit of 377.8 billion yen recorded in February.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
