- EUR/JPY builds on overnight recovery from one-month low amid modest JPY weakness.
- An unexpected drop in Japan’s PPI, coupled with a positive risk tone, undermines the safe-haven JPY.
- Expectations of a further BoJ rate hike in 2024 should keep the pair under control ahead of the key ECB policy decision.
The EUR/JPY pair gains some positive traction on Thursday and recovers further from an over one-month low around the 155.45 region touched the previous day. However, spot prices retreat a few pips from the daily peak and are currently trading around the 157.00 level as investors await the European Central Bank (ECB) interest rate decision for a fresh impetus.
The ECB is widely expected to announce a 25 basis point (bp) rate cut at the end of its September monetary policy meeting, marking the second adjustment in its current policy easing cycle. However, the market focus will remain on updated economic projections and forward guidance. In addition to this, ECB President Christine Lagarde’s comments at the post-meeting press conference will influence the common currency and determine the near-term path of the EUR/JPY cross.
Looking ahead to the key central bank event risk, a soft reading of Japan’s Producer Price Index (PPI) undermined hawkish signals from the Bank of Japan (BoJ) and prompted some selling around the Japanese Yen (JPY). Indeed, the headline PPI declined by 0.2% in August and the annual rate decelerated more than anticipated to 2.5% from 3.0% in July. This, coupled with a generally positive tone around equity markets, weighs on demand for the safe-haven JPY and lends support to the EUR/JPY cross.
That said, comments from Bank of Japan (BoJ) board member Naoki Tamura saying that the road to an end to loose policy is still very long reaffirms expectations that the central bank will raise borrowing costs further by the end of this year. This marks a major divergence compared to the dovish stance adopted by the ECB, which should limit JPY losses. Therefore, it will be prudent to wait for strong follow-through buying before confirming that the EUR/JPY cross has bottomed out.
Economic indicator
Monetary policy and ECB press conference
After the ECB’s interest rate decision, the President of the ECB holds a press conference on monetary policy. His comments can influence the volatility of the EUR and determine the short-term movement, positive or negative. A hawkish view is considered positive, or bullish, for the EUR, while a pessimistic view is considered negative, or bearish.
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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.
