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EUR/JPY trades little changed as BoJ hike priced in and Eurozone data upbeat

  • The EUR/JPY cross is trading flat at the start of the week as the BoJ's telegraphed price hike is priced in.
  • Eurozone data show a trade surplus in January and final inflation estimates match preliminary ones.
  • The Japanese Yen is affected by fears that the BoJ's interest rate hike is a “one-time” affair.

EUR/JPY is trading little changed around 162.00 on Monday, having edged up slightly following the release of relatively encouraging Eurozone figures, which showed the region posted a trade surplus in January, and final revisions of February inflation data that coincided with preliminary estimates.

The Japanese Yen (JPY), meanwhile, is trading lower ahead of the Bank of Japan's (BoJ) monetary policy meeting on Tuesday. Although the BoJ is expected to raise interest rates from negative territory (minus 0.1%) at the meeting – a move that would be positive for the JPY as higher interest rates attract more foreign capital inflows – the news appears to It has already been digested by the markets before the event.

The lack of yen buying on the eve of the meeting could be due to the view that the rate hike could be a one-off event and not the start of a cycle. Deflation remains a tough nut to crack in Japan and, although a recent round of wage negotiations has led to an increase in workers' wages, price increases have been hard-won and there remains some skepticism over the long-term inflation outlook, according to Bloomberg News.

It may also be the case that stubbornly high inflation in the Eurozone is tightening the outlook for interest rates there, which is supporting the Euro (EUR). The European Central Bank (ECB) may have to keep interest rates higher for longer compared to previous expectations, and this is supporting the Euro and EUR/JPY.

Monday's final revisions to the Harmonized Consumer Price Index for the Eurozone were in line with preliminary estimates of 2.6% year-on-year and 0.6% month-on-month for headline inflation, and 3.1% year-on-year and 0.7% month-on-month for core inflation. , according to Eurostat data. These figures are still above those of Japan.

Seasonally adjusted Eurozone trade balance data showed a surplus of 11.4 billion in January compared to 16.8 billion in December, while seasonally adjusted figures were much higher, revealing a surplus in January of 28.1 billion compared to a deficit of 14.3 billion. million in December.

Source: Fx Street

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