- EUR/JPY trades wildly as Lagarde fails to impress.
- The ECB raises interest rates by 50 basis points and announces a new anti-fragmentation tool.
- The Bank of Japan maintains its ultra-loose monetary policy stance.
The EUR/JPY looks to stabilize around 141.00 after strong volatility of 150 pips in the last hour, thanks to ECB policy announcements.
The cross broke out of its intraday trading range to the upside and jumped sharply to hit a two-week high at 142.32 after the ECB hiked key interest rates by 50 basis points as it announced its Transmission Protection Instrument (TPI). ), a new bond purchase plan aimed at helping the most indebted countries in the eurozone and avoiding financial fragmentation within the monetary bloc.
Optimism about a more hawkish-than-expected ECB quickly faded after the central bank revealed forward guidance, signaling a meeting-by-meeting approach, as the next rate hike path remains data dependent.
In addition, the lack of specificity of the new anti-fragmentation tool and doubts about its ability to protect member countries weighed on the euro. This detracted from the impressive rally in EUR/JPY.
On the yen side, EUR/JPY continues to find support from the Bank of Japan’s easing rhetoric, which maintained its ultra-loose monetary policy. The Bank of Japan remained firm in its monetary policy and did not change its guidelines. However, the Governor of the Bank of Japan, Haruhiko Kuroda, acknowledged the negative effects of the rapid weakening of the yen in his press conference after the meeting.
With policy decisions from the ECB and the Bank of Japan out of the way, investors are now looking to Wall Street sentiment for further trade momentum. The US earnings season is underway and could have a significant impact on risk sentiment.
Technical levels
Source: Fx Street
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